Mr. Dingell (for himself, Mr. Rangel, Mr. Waxman, Mr. George Miller of California, Mr. Stark, Mr. Pallone, and Mr. Andrews) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Education and Labor, Ways and Means, Oversight and Government Reform, the Budget, Rules, Natural Resources, and the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes.

1.

Short title; table of divisions, titles, and subtitles

(a)

Short title

This Act may be cited as the Affordable Health Care for America Act.

(b)

Table of divisions, titles, and subtitles

This Act is divided into divisions, titles, and subtitles as follows:

Division A—Affordable Health Care Choices

Title I—Immediate Reforms

Title II—Protections and Standards for Qualified Health Benefits Plans

Subtitle A—General Standards

Subtitle B—Standards Guaranteeing Access to Affordable Coverage

Subtitle C—Standards Guaranteeing Access to Essential Benefits

Subtitle D—Additional Consumer Protections

Subtitle E—Governance

Subtitle F—Relation to Other Requirements; Miscellaneous

Title III—Health Insurance Exchange and Related Provisions

Subtitle A—Health Insurance Exchange

Subtitle B—Public Health Insurance Option

Subtitle C—Individual Affordability Credits

Title IV—Shared responsibility

Subtitle A—Individual Responsibility

Subtitle B—Employer Responsibility

Title V—Amendments to Internal Revenue Code of 1986

Subtitle A—Shared Responsibility

Subtitle B—Credit for Small Business Employee Health Coverage Expenses

Subtitle A—Drug Discount for Rural and Other Hospitals; 340B Program Integrity

Subtitle B—Programs

Subtitle C—Food and Drug Administration

Subtitle D—Community Living Assistance Services and Supports

Subtitle E—Miscellaneous

Division D—Indian Health Care Improvement

Title I—Amendments to Indian Laws

Title II—Improvement of Indian Health Care Provided Under the Social Security Act

A

Affordable Health Care Choices

100.

Purpose; table of contents of division; general definitions

(a)

Purpose

(1)

In general

The purpose of this division is to provide affordable, quality health care for all Americans and reduce the growth in health care spending.

(2)

Building on current system

This division achieves this purpose by building on what works in today’s health care system, while repairing the aspects that are broken.

(3)

Insurance reforms

This division—

(A)

enacts strong insurance market reforms;

(B)

creates a new Health Insurance Exchange, with a public health insurance option alongside private plans;

(C)

includes sliding scale affordability credits; and

(D)

initiates shared responsibility among workers, employers, and the Government;

so that all Americans have coverage of essential health benefits.(4)

Health delivery reform

This division institutes health delivery system reforms both to increase quality and to reduce growth in health spending so that health care becomes more affordable for businesses, families, and Government.

(b)

Table of contents of division

The table of contents of this division is as follows:

Sec. 100. Purpose; table of contents of division; general definitions.

Title I—Immediate Reforms

Sec. 101. National high-risk pool program.

Sec. 102. Ensuring value and lower premiums.

Sec. 103. Ending health insurance rescission abuse.

Sec. 104. Sunshine on price gouging by health insurance issuers.

Sec. 105. Requiring the option of extension of dependent coverage for uninsured young adults.

Sec. 106. Limitations on preexisting condition exclusions in group health plans in advance of applicability of new prohibition of preexisting condition exclusions.

Sec. 107. Prohibiting acts of domestic violence from being treated as preexisting conditions.

Sec. 108. Ending health insurance denials and delays of necessary treatment for children with deformities.

The term acceptable coverage has the meaning given such term in section 302(d)(2).

(2)

Basic plan

The term basic plan has the meaning given such term in section 303(c).

(3)

Commissioner

The term Commissioner means the Health Choices Commissioner established under section 241.

(4)

Cost-sharing

The term cost-sharing includes deductibles, coinsurance, copayments, and similar charges, but does not include premiums, balance billing amounts for non-network providers, or spending for non-covered services.

(5)

Dependent

The term dependent has the meaning given such term by the Commissioner and includes a spouse.

(6)

Employment-based health plan

The term employment-based health plan—

(A)

means a group health plan (as defined in section 733(a)(1) of the Employee Retirement Income Security Act of 1974);

(B)

includes such a plan that is the following:

(i)

Federal, state, and tribal governmental plans

A governmental plan (as defined in section 3(32) of the Employee Retirement Income Security Act of 1974), including a health benefits plan offered under chapter 89 of title 5, United States Code.

(ii)

Church plans

A church plan (as defined in section 3(33) of the Employee Retirement Income Security Act of 1974); and

(C)

excludes coverage described in section 302(d)(2)(E) (relating to TRICARE).

(7)

Enhanced plan

The term enhanced plan has the meaning given such term in section 303(c).

(8)

Essential benefits package

The term essential benefits package is defined in section 222(a).

(9)

Exchange-participating health benefits plan

The term Exchange-participating health benefits plan means a qualified health benefits plan that is offered through the Health Insurance Exchange and may be purchased directly from the entity offering the plan or through enrollment agents and brokers.

(10)

Family

The term family means an individual and includes the individual’s dependents.

(11)

Federal poverty level; FPL

The terms Federal poverty level and FPL have the meaning given the term poverty line in section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2)), including any revision required by such section.

(12)

Health benefits plan

The term health benefits plan means health insurance coverage and an employment-based health plan and includes the public health insurance option.

(13)

Health insurance coverage

The term health insurance coverage has the meaning given such term in section 2791 of the Public Health Service Act, but does not include coverage in relation to its provision of excepted benefits—

(A)

described in paragraph (1) of subsection (c) of such section; or

(B)

described in paragraph (2), (3), or (4) of such subsection if the benefits are provided under a separate policy, certificate, or contract of insurance.

(14)

Health insurance issuer

The term health insurance issuer has the meaning given such term in section 2791(b)(2) of the Public Health Service Act.

(15)

Health Insurance Exchange

The term Health Insurance Exchange means the Health Insurance Exchange established under section 301.

(16)

Indian

The term Indian has the meaning given such term in section 4 of the Indian Health Care Improvement Act (24 U.S.C. 1603).

(17)

Indian health care provider

The term Indian health care provider means a health care program operated by the Indian Health Service, an Indian tribe, tribal organization, or urban Indian organization as such terms are defined in section 4 of the Indian Health Care Improvement Act (25 U.S.C. 1603).

(18)

Medicaid

The term Medicaid means a State plan under title XIX of the Social Security Act (whether or not the plan is operating under a waiver under section 1115 of such Act).

(19)

Medicaid eligible individual

The term Medicaid eligible individual means an individual who is eligible for medical assistance under Medicaid.

(20)

Medicare

The term Medicare means the health insurance programs under title XVIII of the Social Security Act.

(21)

Plan sponsor

The term plan sponsor has the meaning given such term in section 3(16)(B) of the Employee Retirement Income Security Act of 1974.

(22)

Plan year

The term plan year means—

(A)

with respect to an employment-based health plan, a plan year as specified under such plan; or

(B)

with respect to a health benefits plan other than an employment-based health plan, a 12-month period as specified by the Commissioner.

(23)

Premium plan; premium-plus plan

The terms premium plan and premium-plus plan have the meanings given such terms in section 303(c).

(24)

QHBP offering entity

The terms QHBP offering entity means, with respect to a health benefits plan that is—

(A)

a group health plan (as defined, subject to subsection (d), in section 733(a)(1) of the Employee Retirement Income Security Act of 1974), the plan sponsor in relation to such group health plan, except that, in the case of a plan maintained jointly by 1 or more employers and 1 or more employee organizations and with respect to which an employer is the primary source of financing, such term means such employer;

the public health insurance option, the Secretary of Health and Human Services;

(D)

a non-Federal governmental plan (as defined in section 2791(d) of the Public Health Service Act), the State or political subdivision of a State (or agency or instrumentality of such State or subdivision) which establishes or maintains such plan; or

(E)

a Federal governmental plan (as defined in section 2791(d) of the Public Health Service Act), the appropriate Federal official.

meets the requirements for such a plan under title II and includes the public health insurance option; and

(B)

is offered by a QHBP offering entity that meets the applicable requirements of such title with respect to such plan.

(26)

Public health insurance option

The term public health insurance option means the public health insurance option as provided under subtitle B of title III.

(27)

Service area; premium rating area

The terms service area and premium rating area mean with respect to health insurance coverage—

(A)

offered other than through the Health Insurance Exchange, such an area as established by the QHBP offering entity of such coverage in accordance with applicable State law; and

(B)

offered through the Health Insurance Exchange, such an area as established by such entity in accordance with applicable State law and applicable rules of the Commissioner for Exchange-participating health benefits plans.

(28)

State

The term State means the 50 States and the District of Columbia and includes—

(A)

for purposes of title I, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands; and

(B)

for purposes of titles II and III, as elected under and subject to section 346, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

(29)

State Medicaid agency

The term State Medicaid agency means, with respect to a Medicaid plan, the single State agency responsible for administering such plan under title XIX of the Social Security Act.

The Secretary of Health and Human Services (in this section referred to as the Secretary) shall establish a temporary national high-risk pool program (in this section referred to as the program) to provide health benefits to eligible individuals during the period beginning on January 1, 2010, and, subject to subsection (h)(3)(B), ending on the date on which the Health Insurance Exchange is established.

(b)

Administration

The Secretary may carry out this section directly or, pursuant to agreements, grants, or contracts with States, through State high-risk pool programs provided that the requirements of this section are met.

(c)

Eligibility

For purposes of this section, the term eligible individual means an individual—

(1)

who—

(A)

is not eligible for—

(i)

benefits under title XVIII, XIX, or XXI of the Social Security Act; or

(ii)

coverage under an employment-based health plan (not including coverage under a COBRA continuation provision, as defined in section 107(d)(1)); and

(B)

who—

(i)

is an eligible individual under section 2741(b) of the Public Health Service Act; or

(ii)

is medically eligible for the program by virtue of being an individual described in subsection (d) at any time during the 6-month period ending on the date the individual applies for high-risk pool coverage under this section;

(2)

who is the spouse or dependent of an individual who is described in paragraph (1); or

(3)

who has not had health insurance coverage or coverage under an employment-based health plan for at least the 6-month period immediately preceding the date of the individual’s application for high-risk pool coverage under this section.

For purposes of paragraph (1)(A)(ii), a person who is in a waiting period as defined in section 2701(b)(4) of the Public Health Service Act shall not be considered to be eligible for coverage under an employment-based health plan.(d)

Medically eligible requirements

For purposes of subsection (c)(1)(B)(ii), an individual described in this subsection is an individual—

(1)

who, during the 6-month period ending on the date the individual applies for high-risk pool coverage under this section applied for individual health insurance coverage and—

(A)

was denied such coverage because of a preexisting condition or health status; or

(B)

was offered such coverage—

(i)

under terms that limit the coverage for such a preexisting condition; or

(ii)

at a premium rate that is above the premium rate for high risk pool coverage under this section; or

(2)

who has an eligible medical condition as defined by the Secretary.

In making a determination under paragraph (1) of whether an individual was offered individual coverage at a premium rate above the premium rate for high risk pool coverage, the Secretary shall make adjustments to offset differences in premium rating that are attributable solely to differences in age rating. (e)

Enrollment

To enroll in coverage in the program, an individual shall—

(1)

submit to the Secretary an application for participation in the program, at such time, in such manner, and containing such information as the Secretary shall require;

(2)

attest that the individual is an eligible individual and is a resident of one of the 50 States or the District of Columbia; and

(3)

if the individual had other prior health insurance coverage or coverage under an employment-based health plan during the previous 6 months, provide information as to the nature and source of such coverage and reasons for its discontinuance.

(f)

Protection against dumping risks by insurers

(1)

In general

The Secretary shall establish criteria for determining whether health insurance issuers and employment-based health plans have discouraged an individual from remaining enrolled in prior coverage based on that individual’s health status.

(2)

Sanctions

An issuer or employment-based health plan shall be responsible for reimbursing the program for the medical expenses incurred by the program for an individual who, based on criteria established by the Secretary, the Secretary finds was encouraged by the issuer to disenroll from health benefits coverage prior to enrolling in the program. The criteria shall include at least the following circumstances:

(A)

In the case of prior coverage obtained through an employer, the provision by the employer, group health plan, or the issuer of money or other financial consideration for disenrolling from the coverage.

(B)

In the case of prior coverage obtained directly from an issuer or under an employment-based health plan—

(i)

the provision by the issuer or plan of money or other financial consideration for disenrolling from the coverage; or

(ii)

in the case of an individual whose premium for the prior coverage exceeded the premium required by the program (adjusted based on the age factors applied to the prior coverage)—

(I)

the prior coverage is a policy that is no longer being actively marketed (as defined by the Secretary) by the issuer; or

(II)

the prior coverage is a policy for which duration of coverage form issue or health status are factors that can be considered in determining premiums at renewal.

(3)

Construction

Nothing in this subsection shall be construed as constituting exclusive remedies for violations of criteria established under paragraph (1) or as preventing States from applying or enforcing such paragraph or other provisions under law with respect to health insurance issuers.

(g)

Covered benefits, cost-sharing, premiums, and consumer protections

(1)

Premium

The monthly premium charged to eligible individuals for coverage under the program—

(A)

may vary by age so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1;

(B)

shall be set at a level that does not exceed 125 percent of the prevailing standard rate for comparable coverage in the individual market; and

(C)

shall be adjusted for geographic variation in costs.

Health insurance issuers shall provide such information as the Secretary may require to determine prevailing standard rates under this paragraph. The Secretary shall establish standard rates in consultation with the National Association of Insurance Commissioners.(2)

Covered benefits

Covered benefits under the program shall be determined by the Secretary and shall be consistent with the basic categories in the essential benefits package described in section 222. Under such benefits package—

(A)

the annual deductible for such benefits may not be higher than $1,500 for an individual or such higher amount for a family as determined by the Secretary;

(B)

there may not be annual or lifetime limits; and

(C)

the maximum cost-sharing with respect to an individual (or family) for a year shall not exceed $5,000 for an individual (or $10,000 for a family).

(3)

No preexisting condition exclusion periods

No preexisting condition exclusion period shall be imposed on coverage under the program.

(4)

Appeals

The Secretary shall establish an appeals process for individuals to appeal a determination of the Secretary—

(A)

with respect to claims submitted under this section; and

(B)

with respect to eligibility determinations made by the Secretary under this section.

(5)

State contribution, maintenance of effort

As a condition of providing health benefits under this section to eligible individual residing in a State—

(A)

in the case of a State in which a qualified high-risk pool (as defined under section 2744(c)(2) of the Public Health Service Act) was in effect as of July 1, 2009, the Secretary shall require the State make a maintenance of effort payment each year that the high-risk pool is in effect equal to an amount not less than the amount of all sources of funding for high-risk pool coverage made by that State in the year ending July 1, 2009; and

(B)

in the case of a State which required health insurance issuers to contribute to a State high-risk pool or similar arrangement for the assessment against such issuers for pool losses, the State shall maintain such a contribution arrangement among such issuers.

(6)

Limiting program expenditures

The Secretary shall, with respect to the program—

(A)

establish procedures to protect against fraud, waste, and abuse under the program; and

(B)

provide for other program integrity methods.

(7)

Treatment as creditable coverage

Coverage under the program shall be treated, for purposes of applying the definition of creditable coverage under the provisions of title XXVII of the Public Health Service Act, part 6 of subtitle B of title I of Employee Retirement Income Security Act of 1974, and chapter 100 of the Internal Revenue Code of 1986 (and any other provision of law that references such provisions) in the same manner as if it were coverage under a State health benefits risk pool described in section 2701(c)(1)(G) of the Public Health Service Act.

(h)

Funding; Termination of Authority

(1)

In general

There is appropriated to the Secretary, out of any moneys in the Treasury not otherwise appropriated, $5,000,000,000 to pay claims against (and administrative costs of) the high-risk pool under this section in excess of the premiums collected with respect to eligible individuals enrolled in the high-risk pool. Such funds shall be available without fiscal year limitation.

(2)

Insufficient funds

If the Secretary estimates for any fiscal year that the aggregate amounts available for payment of expenses of the high-risk pool will be less than the amount of the expenses, the Secretary shall make such adjustments as are necessary to eliminate such deficit, including reducing benefits, increasing premiums, or establishing waiting lists.

(3)

Termination of authority

(A)

In general

Except as provided in subparagraph (B), coverage of eligible individuals under a high-risk pool shall terminate as of the date on which the Health Insurance Exchange is established.

(B)

Transition to exchange

The Secretary shall develop procedures to provide for the transition of eligible individuals who are enrolled in health insurance coverage offered through a high-risk pool established under this section to be enrolled in acceptable coverage. Such procedures shall ensure that there is no lapse in coverage with respect to the individual and may extend coverage offered through such a high-risk pool beyond 2012 if the Secretary determines necessary to avoid such a lapse.

102.

Ensuring value and lower premiums

(a)

Group health insurance coverage

Title XXVII of the Public Health Service Act is amended by inserting after section 2713 the following new section:

2714.

Ensuring value and lower premiums

(a)

In general

Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in which the coverage has a medical loss ratio below a level specified by the Secretary (but not less than 85 percent), the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of the amount by which the issuer’s medical loss ratio is less than the level so specified.

(b)

Implementation

The Secretary shall establish a uniform definition of medical loss ratio and methodology for determining how to calculate it based on the average medical loss ratio in a health insurance issuer’s book of business for the small and large group market. Such methodology shall be designed to take into account the special circumstances of smaller plans, different types of plans, and newer plans. In determining the medical loss ratio, the Secretary shall exclude State taxes and licensing or regulatory fees. Such methodology shall be designed and exceptions shall be established to ensure adequate participation by health insurance issuers, competition in the health insurance market, and value for consumers so that their premiums are used for services.

(c)

Sunset

Subsections (a) and (b) shall not apply to health insurance coverage on and after the first date that health insurance coverage is offered through the Health Insurance Exchange.

.

(b)

Individual health insurance coverage

Such title is further amended by inserting after section 2753 the following new section:

2754.

Ensuring value and lower premiums

The provisions of section 2714 shall apply to health insurance coverage offered in the individual market in the same manner as such provisions apply to health insurance coverage offered in the small or large group market except to the extent the Secretary determines that the application of such section may destabilize the existing individual market.

.

(c)

Immediate implementation

The amendments made by this section shall apply in the group and individual market for plan years beginning on or after January 1, 2010, or as soon as practicable after such date.

103.

Ending health insurance rescission abuse

(a)

Clarification regarding application of guaranteed renewability of individual and group health insurance coverage

Sections 2712 and 2742 of the Public Health Service Act (42 U.S.C. 300gg–12, 300gg–42) are each amended—

(1)

in its heading, by inserting and continuation in force, including prohibition of rescission, after guaranteed renewability; and

(2)

in subsection (a), by inserting , including without rescission, after continue in force.

(b)

Secretarial guidance regarding rescissions

(1)

Group health insurance market

Section 2712 of such Act (42 U.S.C. 300gg–12) is amended by adding at the end the following:

(f)

Rescission

A health insurance issuer may rescind group health insurance coverage only upon clear and convincing evidence of fraud described in subsection (b)(2), under procedures that provide for independent, external third-party review.

.

(2)

Individual health market

Section 2742 of such Act (42 U.S.C. 300gg–42) is amended by adding at the end the following:

(f)

Rescission

A health insurance issuer may rescind individual health insurance coverage only upon clear and convincing evidence of fraud described in subsection (b)(2), under procedures that provide for independent, external third-party review.

.

(3)

Guidance

The Secretary of Health and Human Services, no later than 90 days after the date of the enactment of this Act, shall issue guidance implementing the amendments made by paragraphs (1) and (2), including procedures for independent, external third-party review.

Subpart 1 of part B of title XXVII of such Act (42 U.S.C. 300gg–41 et seq.) is amended by adding at the end the following:

2746.

Opportunity for independent, external third-party review in cases of rescission

(a)

Notice and review right

If a health insurance issuer determines to rescind health insurance coverage for an individual in the individual market, before such rescission may take effect the issuer shall provide the individual with notice of such proposed rescission and an opportunity for a review of such determination by an independent, external third-party under procedures specified by the Secretary under section 2742(f).

(b)

Independent determination

If the individual requests such review by an independent, external third-party of a rescission of health insurance coverage, the coverage shall remain in effect until such third party determines that the coverage may be rescinded under the guidance issued by the Secretary under section 2742(f).

.

(2)

Application to group health insurance

Such title is further amended by adding after section 2702 the following new section:

2703.

Opportunity for independent, external third-party review in cases of rescission

The provisions of section 2746 shall apply to group health insurance coverage in the same manner as such provisions apply to individual health insurance coverage, except that any reference to section 2742(f) is deemed a reference to section 2712(f).

.

(d)

Effective Date

The amendments made by this section shall take effect on the date of the enactment of this Act and shall apply to rescissions occurring on and after July 1, 2010, with respect to health insurance coverage issued before, on, or after such date.

104.

Sunshine on price gouging by health insurance issuers

The Secretary of Health and Human Services, in conjunction with States, shall establish a process for the annual review of increases in premiums for health insurance coverage. Such process shall require health insurance issuers to submit a justification for any premium increases prior to implementation of the increase.

105.

Requiring the option of extension of dependent coverage for uninsured young adults

(a)

Under group health plans

(1)

PHSA

Title XXVII of the Public Health Service Act is amended by inserting after section 2702 the following new section:

2703.

Requiring the option of extension of dependent coverage for uninsured young adults

(a)

In general

A group health plan and a health insurance issuer offering health insurance coverage in connection with a group health plan that provides coverage for dependent children shall make available such coverage, at the option of the participant involved, for one or more qualified children (as defined in subsection (b)) of the participant.

(b)

Qualified child defined

In this section, the term qualified child means, with respect to a participant in a group health plan or group health insurance coverage, an individual who (but for age) would be treated as a dependent child of the participant under such plan or coverage and who—

(1)

is under 27 years of age; and

(2)

is not enrolled as a participant, beneficiary, or enrollee (other than under this section, section 2746, or section 704 of the Employee Retirement Income Security Act of 1974) under any health insurance coverage or group health plan.

(c)

Premiums

Nothing in this section shall be construed as preventing a group health plan or health insurance issuer with respect to group health insurance coverage from increasing the premiums otherwise required for coverage provided under this section consistent with standards established by the Secretary based upon family size.

.

(2)

Employee retirement income security act of 1974

(A)

In general

Part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by inserting after section 703 the following new section:

704.

Requiring the option of extension of dependent coverage for uninsured young adults

(a)

In general

A group health plan and a health insurance issuer offering health insurance coverage in connection with a group health plan that provides coverage for dependent children shall make available such coverage, at the option of the participant involved, for one or more qualified children (as defined in subsection (b)) of the participant.

(b)

Qualified child defined

In this section, the term qualified child means, with respect to a participant in a group health plan or group health insurance coverage, an individual who (but for age) would be treated as a dependent child of the participant under such plan or coverage and who—

(1)

is under 27 years of age; and

(2)

is not enrolled as a participant, beneficiary, or enrollee (other than under this section) under any health insurance coverage or group health plan.

(c)

Premiums

Nothing in this section shall be construed as preventing a group health plan or health insurance issuer with respect to group health insurance coverage from increasing the premiums otherwise required for coverage provided under this section consistent with standards established by the Secretary based upon family size.

.

(B)

Clerical amendment

The table of contents of such Act is amended by inserting after the item relating to section 703 the following new item:

Sec. 704. Requiring the option of extension of dependent coverage for uninsured young adults.

.

(3)

IRC

(A)

In general

Subchapter A of chapter 100 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

9804.

Requiring the option of extension of dependent coverage for uninsured young adults

(a)

In general

A group health plan that provides coverage for dependent children shall make available such coverage, at the option of the participant involved, for one or more qualified children (as defined in subsection (b)) of the participant.

(b)

Qualified child defined

In this section, the term qualified child means, with respect to a participant in a group health plan, an individual who (but for age) would be treated as a dependent child of the participant under such plan and who—

(1)

is under 27 years of age; and

(2)

is not enrolled as a participant, beneficiary, or enrollee (other than under this section, section 704 of the Employee Retirement Income Security Act of 1974, or section 2704 or 2746 of the Public Health Service Act) under any health insurance coverage or group health plan.

(c)

Premiums

Nothing in this section shall be construed as preventing a group health plan from increasing the premiums otherwise required for coverage provided under this section consistent with standards established by the Secretary based upon family size.

.

(B)

Clerical amendment

The table of sections of such chapter is amended by inserting after the item relating to section 9803 the following:

Sec. 9804. Requiring the option of extension of dependent coverage for uninsured young adults.

.

(b)

Individual health insurance coverage

Title XXVII of the Public Health Service Act is amended by inserting after section 2745 the following new section:

2746.

Requiring the option of extension of dependent coverage for uninsured young adults

The provisions of section 2703 shall apply to health insurance coverage offered by a health insurance issuer in the individual market in the same manner as they apply to health insurance coverage offered by a health insurance issuer in connection with a group health plan in the small or large group market.

.

(c)

Effective dates

(1)

Group health plans

The amendments made by subsection (a) shall apply to group health plans for plan years beginning on or after January 1, 2010.

(2)

Individual health insurance coverage

Section 2746 of the Public Health Service Act, as inserted by subsection (b), shall apply with respect to health insurance coverage offered, sold, issued, renewed, in effect, or operated in the individual market on or after January 1, 2010.

106.

Limitations on preexisting condition exclusions in group health plans in advance of applicability of new prohibition of preexisting condition exclusions

(a)

Amendments to the Employee Retirement Income Security Act of 1974

(1)

Reduction in look-back period

Section 701(a)(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1181(a)(1)) is amended by striking 6-month period and inserting 30-day period.

Section 701 of such Act (29 U.S.C. 1181) is amended by adding at the end the following new subsection:

(h)

Termination

This section shall cease to apply to any group health plan as of the date that such plan becomes subject to the requirements of section 211 of the (relating to prohibiting preexisting condition exclusions).

.

(b)

Amendments to the Internal Revenue Code of 1986

(1)

Reduction in look-back period

Section 9801(a)(1) of the Internal Revenue Code of 1986 is amended by striking 6-month period and inserting 30-day period.

(2)

Reduction in permitted preexisting condition limitation period

Section 9801(a)(2) of such Code is amended by striking 12 months and inserting 3 months, and by striking 18 months and inserting 9 months.

(3)

Sunset of interim limitation

Section 9801 of such Code is amended by adding at the end the following new subsection:

(g)

Termination

This section shall cease to apply to any group health plan as of the date that such plan becomes subject to the requirements of section 211 of the (relating to prohibiting preexisting condition exclusions).

.

(c)

Amendments to Public Health Service Act

(1)

Reduction in look-back period

Section 2701(a)(1) of the Public Health Service Act (42 U.S.C. 300gg(a)(1)) is amended by striking 6-month period and inserting 30-day period.

Section 2701 of such Act (42 U.S.C. 300gg) is amended by adding at the end the following new subsection:

(h)

Termination

This section shall cease to apply to any group health plan as of the date that such plan becomes subject to the requirements of section 211 of the (relating to prohibiting preexisting condition exclusions).

.

(4)

Miscellaneous technical amendment

Section 2702(a)(2) of such Act (42 U.S.C. 300gg–1) is amended by striking 701 and inserting 2701.

(d)

Effective date

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply with respect to group health plans for plan years beginning on or after January 1, 2010.

(2)

Special rule for collective bargaining agreements

In the case of a group health plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before the date of the enactment of this Act, the amendments made by this section shall not apply to plan years beginning before the earlier of—

(A)

the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act);

(B)

3 years after the date of the enactment of this Act.

107.

Prohibiting acts of domestic violence from being treated as preexisting conditions

(a)

ERISA

Section 701(d)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. ) is amended—

(1)

in the heading, by inserting or domestic violence after pregnancy; and

(2)

by inserting or domestic violence after relating to pregnancy.

(b)

PHSA

(1)

Group market

Section 2701(d)(3) of the Public Health Service Act (42 U.S.C. 300gg(d)(3)) is amended—

(A)

in the heading, by inserting or domestic violence after pregnancy; and

(B)

by inserting or domestic violence after relating to pregnancy.

(2)

Individual market

Title XXVII of such Act is amended by inserting after section 2753 the following new section:

2754.

Prohibition on domestic violence as preexisting condition

A health insurance issuer offering health insurance coverage in the individual market may not, on the basis of domestic violence, impose any preexisting condition exclusion (as defined in section 2701(b)(1)(A)) with respect to such coverage.

.

(c)

IRC

Section 9801(d)(3) of the Internal Revenue Code of 1986 is amended—

(1)

in the heading, by inserting or domestic violence after pregnancy; and

(2)

by inserting or domestic violence after relating to pregnancy.

(d)

Effective dates

(1)

Except as otherwise provided in this subsection, the amendments made by this section shall apply with respect to group health plans (and health insurance issuers offering group health insurance coverage) for plan years beginning on or after January 1, 2010.

(2)

The amendment made by subsection (b)(2) shall apply with respect to health insurance coverage offered, sold, issued, renewed, in effect, or operated in the individual market on or after such date.

108.

Ending health insurance denials and delays of necessary treatment for children with deformities

(a)

Amendments to the Employee Retirement Income Security Act of 1974

(1)

In general

Subpart B of part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding at the end the following new section:

715.

Standards relating to benefits for minor child’s congenital or developmental deformity or disorder

(a)

Requirements for treatment for children with deformities

(1)

In general

A group health plan, and a health insurance issuer offering group health insurance coverage, that provides coverage for surgical benefits shall provide coverage for outpatient and inpatient diagnosis and treatment of a minor child’s congenital or developmental deformity, disease, or injury. A minor child shall include any individual who is 21 years of age or younger.

(2)

Treatment defined

(A)

In general

In this section, the term treatment includes reconstructive surgical procedures (procedures that are generally performed to improve function, but may also be performed to approximate a normal appearance) that are performed on abnormal structures of the body caused by congenital defects, developmental abnormalities, trauma, infection, tumors, or disease, including—

(i)

procedures that do not materially affect the function of the body part being treated; and

(ii)

procedures for secondary conditions and follow-up treatment.

(B)

Exception

Such term does not include cosmetic surgery performed to reshape normal structures of the body to improve appearance or self-esteem.

(b)

Notice

A group health plan under this part shall comply with the notice requirement under section 713(b) (other than paragraph (3)) with respect to the requirements of this section.

.

(2)

Conforming amendment

(A)

Subsection (c) of section 731 of such Act is amended by striking section 711 and inserting sections 711 and 715.

(B)

The table of contents in section 1 of such Act is amended by inserting after the item relating to section 714 the following new item:

Subchapter B of chapter 100 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

9814.

Standards relating to benefits for minor child’s congenital or developmental deformity or disorder

(a)

Requirements for treatment for children with deformities

A group health plan that provides coverage for surgical benefits shall provide coverage for outpatient and inpatient diagnosis and treatment of a minor child’s congenital or developmental deformity, disease, or injury. A minor child shall include any individual who is 21 years of age or younger.

(b)

Treatment defined

(1)

In general

In this section, the term treatment includes reconstructive surgical procedures (procedures that are generally performed to improve function, but may also be performed to approximate a normal appearance) that are performed on abnormal structures of the body caused by congenital defects, developmental abnormalities, trauma, infection, tumors, or disease, including—

(A)

procedures that do not materially affect the function of the body part being treated, and

(B)

procedures for secondary conditions and follow-up treatment.

(2)

Exception

Such term does not include cosmetic surgery performed to reshape normal structures of the body to improve appearance or self-esteem.

.

(2)

Clerical amendment

The table of sections for subchapter B of chapter 100 of such Code is amended by adding at the end the following new item:

Subpart 2 of part A of title XXVII of the Public Health Service Act is amended by adding at the end the following new section:

2708.

Standards relating to benefits for minor child’s congenital or developmental deformity or disorder

(a)

Requirements for treatment for children with deformities

(1)

In general

A group health plan, and a health insurance issuer offering group health insurance coverage, that provides coverage for surgical benefits shall provide coverage for outpatient and inpatient diagnosis and treatment of a minor child’s congenital or developmental deformity, disease, or injury. A minor child shall include any individual who is 21 years of age or younger.

(2)

Treatment defined

(A)

In general

In this section, the term treatment includes reconstructive surgical procedures (procedures that are generally performed to improve function, but may also be performed to approximate a normal appearance) that are performed on abnormal structures of the body caused by congenital defects, developmental abnormalities, trauma, infection, tumors, or disease, including—

(i)

procedures that do not materially affect the function of the body part being treated; and

(ii)

procedures for secondary conditions and follow-up treatment.

(B)

Exception

Such term does not include cosmetic surgery performed to reshape normal structures of the body to improve appearance or self-esteem.

(b)

Notice

A group health plan under this part shall comply with the notice requirement under section 715(b) of the Employee Retirement Income Security Act of 1974 with respect to the requirements of this section as if such section applied to such plan.

.

(2)

Individual health insurance

Subpart 2 of part B of title XXVII of the Public Health Service Act, as amended by section 161(b), is further amended by adding at the end the following new section:

2755.

Standards relating to benefits for minor child’s congenital or developmental deformity or disorder

The provisions of section 2708 shall apply to health insurance coverage offered by a health insurance issuer in the individual market in the same manner as such provisions apply to health insurance coverage offered by a health insurance issuer in connection with a group health plan in the small or large group market.

.

(3)

Conforming amendments

(A)

Section 2723(c) of such Act (42 U.S.C. 300gg–23(c)) is amended by striking section 2704 and inserting sections 2704 and 2708.

(B)

Section 2762(b)(2) of such Act (42 U.S.C. 300gg–62(b)(2)) is amended by striking section 2751 and inserting sections 2751 and 2755.

(d)

Effective dates

(1)

The amendments made by this section shall apply with respect to group health plans (and health insurance issuers offering group health insurance coverage) for plan years beginning on or after January 1, 2010.

(2)

The amendment made by subsection (c)(2) shall apply with respect to health insurance coverage offered, sold, issued, renewed, in effect, or operated in the individual market on or after such date.

(e)

Coordination

Section 104(1) of the Health Insurance Portability and Accountability Act of 1996 is amended by striking (and the amendments made by this subtitle and section 401) and inserting , part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, parts A and C of title XXVII of the Public Health Service Act, and chapter 100 of the Internal Revenue Code of 1986.

109.

Elimination of lifetime limits

(a)

Amendments to the Employee Retirement Income Security Act of 1974

(1)

In General

Subpart B of part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1185 et seq.), as amended by section 108, is amended by adding at the end the following:

716.

Elimination of lifetime aggregate limits

(a)

In general

A group health plan and a health insurance issuer providing health insurance coverage in connection with a group health plan, may not impose an aggregate dollar lifetime limit with respect to benefits payable under the plan or coverage.

(b)

Definition

In this section, the term aggregate dollar lifetime limit means, with respect to benefits under a group health plan or health insurance coverage offered in connection with a group health plan, a dollar limitation on the total amount that may be paid with respect to such benefits under the plan or health insurance coverage with respect to an individual or other coverage unit on a lifetime basis.

.

(2)

Clerical Amendment

The table of contents in section 1 of such Act, is amended by inserting after the item relating to section 715 the following new item:

Sec. 716. Elimination of lifetime aggregate limits.

.

(b)

Amendments to the Internal Revenue Code of 1986

(1)

In general

Subchapter B of chapter 100 of the Internal Revenue Code of 1986, as amended by section 108(b), is amended by adding at the end the following new section:

9815.

Elimination of lifetime aggregate limits

(a)

In general

A group health plan may not impose an aggregate dollar lifetime limit with respect to benefits payable under the plan.

(b)

Definition

In this section, the term aggregate dollar lifetime limit means, with respect to benefits under a group health plan a dollar limitation on the total amount that may be paid with respect to such benefits under the plan with respect to an individual or other coverage unit on a lifetime basis.

.

(2)

Clerical amendment

The table of sections for subchapter B of chapter 100 of such Code, as amended by section 108(b), is amended by adding at the end the following new item:

Amendment to the Public Health Service Act relating to the group market

(1)

In General

Subpart 2 of part A of title XXVII of the Public Health Service Act (42 U.S.C. 300gg–4 et seq.) as amended by section 108(c)(1), is amended by adding at the end the following:

2709.

Elimination of lifetime aggregate limits

(a)

In General

A group health plan and a health insurance issuer providing health insurance coverage in connection with a group health plan, may not impose an aggregate dollar lifetime limit with respect to benefits payable under the plan or coverage.

(b)

Definition

In this section, the term aggregate dollar lifetime limit means, with respect to benefits under a group health plan or health insurance coverage, a dollar limitation on the total amount that may be paid with respect to such benefits under the plan or health insurance coverage with respect to an individual or other coverage unit on a lifetime basis.

.

(2)

Individual market

Subpart 2 of part B of title XXVII of the Public Health Service Act (42 U.S.C. 300gg–51 et seq.), as amended by section 108(c)(2), is amended by adding at the end the following:

2756.

Elimination of annual or lifetime aggregate limits

The provisions of section 2709 shall apply to health insurance coverage offered by a health insurance issuer in the individual market in the same manner as they apply to health insurance coverage offered by a health insurance issuer in connection with a group health plan in the small or large group market.

.

(d)

Effective dates

(1)

The amendments made by this section shall apply with respect to group health plans (and health insurance issuers offering group health insurance coverage) for plan years beginning on or after January 1, 2010.

(2)

The amendment made by subsection (c)(2) shall apply with respect to health insurance coverage offered, sold, issued, renewed, in effect, or operated in the individual market on or after such date.

110.

Prohibition against postretirement reductions of retiree health benefits by group health plans

(a)

In general

Part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, as amended by sections 108 and 109, is amended by inserting after section 716 the following new section:

Every group health plan shall contain a provision which expressly bars the plan, or any fiduciary of the plan, from reducing the benefits provided under the plan to a retired participant, or beneficiary of such participant, if such reduction affects the benefits provided to the participant or beneficiary as of the date the participant retired for purposes of the plan and such reduction occurs after the participant’s retirement unless such reduction is also made with respect to active participants. Nothing in this section shall prohibit a plan from enforcing a total aggregate cap on amounts paid for retiree health coverage that is part of the plan at the time of retirement.

(b)

No reduction

Notwithstanding that a group health plan may contain a provision reserving the general power to amend or terminate the plan or a provision specifically authorizing the plan to make post-retirement reductions in retiree health benefits, it shall be prohibited for any group health plan, whether through amendment or otherwise, to reduce the benefits provided to a retired participant or the participant’s beneficiary under the terms of the plan if such reduction of benefits occurs after the date the participant retired for purposes of the plan and reduces benefits that were provided to the participant, or the participant’s beneficiary, as of the date the participant retired unless such reduction is also made with respect to active participants.

(c)

Reduction described

For purposes of this section, a reduction in benefits—

(1)

with respect to premiums occurs under a group health plan when a participant’s (or beneficiary’s) share of the total premium (or, in the case of a self-insured plan, the costs of coverage) of the plan substantially increases; or

(2)

with respect to other cost-sharing and benefits under a group health plan occurs when there is a substantial decrease in the actuarial value of the benefit package under the plan.

For purposes of this section, the term substantial means an increase in the total premium share or a decrease in the actuarial value of the benefit package that is greater than 5 percent.

(b)

Conforming amendment

The table of contents in section 1 of such Act, as amended by sections 108 and 109, is amended by inserting after the item relating to section 716 the following new item:

An employer may, in a form and manner which shall be prescribed by the Secretary of Labor, apply for a waiver from this provision if the employer can reasonably demonstrate that meeting the requirements of this section would impose an undue hardship on the employer.

(d)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.

111.

Reinsurance program for retirees

(a)

Establishment

(1)

In general

Not later than 90 days after the date of the enactment of this Act, the Secretary of Health and Human Services shall establish a temporary reinsurance program (in this section referred to as the reinsurance program) to provide reimbursement to assist participating employment-based plans with the cost of providing health benefits to retirees and to eligible spouses, surviving spouses and dependents of such retirees.

(2)

Definitions

For purposes of this section:

(A)

The term eligible employment-based plan means a group health plan or employment-based health plan that—

(i)

is —

(I)

maintained by one or more employers (including without limitation any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing), former employers or employee organizations or associations, or a voluntary employees’ beneficiary association, or a committee or board of individuals appointed to administer such plan; or

(II)

a multiemployer plan (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974); and

(ii)

provides health benefits to retirees.

(B)

The term health benefits means medical, surgical, hospital, prescription drug, and such other benefits as shall be determined by the Secretary, whether self-funded or delivered through the purchase of insurance or otherwise.

(C)

The term participating employment-based plan means an eligible employment-based plan that is participating in the reinsurance program.

(D)

The term retiree means, with respect to a participating employment-benefit plan, an individual who—

(i)

is 55 years of age or older;

(ii)

is not eligible for coverage under title XVIII of the Social Security Act; and

(iii)

is not an active employee of an employer maintaining the plan or of any employer that makes or has made substantial contributions to fund such plan.

(E)

The term Secretary means Secretary of Health and Human Services.

(b)

Participation

To be eligible to participate in the reinsurance program, an eligible employment-based plan shall submit to the Secretary an application for participation in the program, at such time, in such manner, and containing such information as the Secretary shall require.

(c)

Payment

(1)

Submission of claims

(A)

In general

Under the reinsurance program, a participating employment-based plan shall submit claims for reimbursement to the Secretary which shall contain documentation of the actual costs of the items and services for which each claim is being submitted.

(B)

Basis for claims

Each claim submitted under subparagraph (A) shall be based on the actual amount expended by the participating employment-based plan involved within the plan year for the appropriate employment based health benefits provided to a retiree or to the spouse, surviving spouse, or dependent of a retiree. In determining the amount of any claim for purposes of this subsection, the participating employment-based plan shall take into account any negotiated price concessions (such as discounts, direct or indirect subsidies, rebates, and direct or indirect remunerations) obtained by such plan with respect to such health benefits. For purposes of calculating the amount of any claim, the costs paid by the retiree or by the spouse, surviving spouse, or dependent of the retiree in the form of deductibles, copayments, and coinsurance shall be included along with the amounts paid by the participating employment-based plan.

(2)

Program payments and limit

If the Secretary determines that a participating employment-based plan has submitted a valid claim under paragraph (1), the Secretary shall reimburse such plan for 80 percent of that portion of the costs attributable to such claim that exceeds $15,000, but is less than $90,000. Such amounts shall be adjusted each year based on the percentage increase in the medical care component of the Consumer Price Index (rounded to the nearest multiple of $1,000) for the year involved.

(3)

Use of payments

Amounts paid to a participating employment-based plan under this subsection shall only be used to reduce the costs of health care provided by the plan by reducing premium costs for the employer or employee association maintaining the plan, and reducing premium contributions, deductibles, copayments, coinsurance, or other out-of-pocket costs for plan participants and beneficiaries. Where the benefits are provided by an employer to members of a represented bargaining unit, the allocation of payments among these purposes shall be subject to collective bargaining. Amounts paid to the plan under this subsection shall not be used as general revenues by the employer or employee association maintaining the plan or for any other purposes. The Secretary shall develop a mechanism to monitor the appropriate use of such payments by such plans.

(4)

Appeals and program protections

The Secretary shall establish—

(A)

an appeals process to permit participating employment-based plans to appeal a determination of the Secretary with respect to claims submitted under this section; and

(B)

procedures to protect against fraud, waste, and abuse under the program.

(5)

Audits

The Secretary shall conduct annual audits of claims data submitted by participating employment-based plans under this section to ensure that they are in compliance with the requirements of this section.

(d)

Retiree Reserve Trust Fund

(1)

Establishment

(A)

In general

There is established in the Treasury of the United States a trust fund to be known as the Retiree Reserve Trust Fund (referred to in this section as the Trust Fund), that shall consist of such amounts as may be appropriated or credited to the Trust Fund as provided for in this subsection to enable the Secretary to carry out the reinsurance program. Such amounts shall remain available until expended.

(B)

Funding

There are hereby appropriated to the Trust Fund, out of any moneys in the Treasury not otherwise appropriated, an amount requested by the Secretary as necessary to carry out this section, except that the total of all such amounts requested shall not exceed $10,000,000,000.

(C)

Appropriations from the Trust Fund

(i)

In general

Amounts in the Trust Fund are appropriated to provide funding to carry out the reinsurance program and shall be used to carry out such program.

(ii)

Limitation to available funds

The Secretary has the authority to stop taking applications for participation in the program or take such other steps in reducing expenditures under the reinsurance program in order to ensure that expenditures under the reinsurance program do not exceed the funds available under this subsection.

112.

Wellness program grants

(a)

Allowance of grant

(1)

In general

For purposes of this section, the Secretaries of Health and Human Services and Labor shall jointly award wellness grants as determined under this section. Wellness program grants shall be awarded to small employers (as defined by the Secretary) for any plan year in an amount equal to 50 percent of the costs paid or incurred by such employers in connection with a qualified wellness program during the plan year. For purposes of the preceding sentence, in the case of any qualified wellness program offered as part of an employment-based health plan, only costs attributable to the qualified wellness program and not to the health plan, or health insurance coverage offered in connection with such a plan, may be taken into account.

(2)

Limitations

(A)

Period

A wellness grant awarded to an employer under this section shall be for up to 3 years.

(B)

Amount

The amount of the grant under paragraph (1) for an employer shall not exceed—

(i)

the product of $150 and the number of employees of the employer for any plan year; and

(ii)

$50,000 for the entire period of the grant.

(b)

Qualified wellness program

For purposes of this section:

(1)

Qualified wellness program

The term qualified wellness program means a program that —

(A)

includes any 3 wellness components described in subsection (c); and

(B)

is to be certified jointly by the Secretary of Health and Human Services and the Secretary of Labor, in coordination with the Director of the Centers for Disease Control and Prevention, as a qualified wellness program under this section.

(2)

Programs must be consistent with research and best practices

(A)

In general

The Secretary of Health and Human Services and the Secretary of Labor shall not certify a program as a qualified wellness program unless the program—

(i)

is consistent with evidence-based research and best practices, as identified by persons with expertise in employer health promotion and wellness programs;

(ii)

includes multiple, evidence-based strategies which are based on the existing and emerging research and careful scientific reviews, including the Guide to Community Preventative Services, the Guide to Clinical Preventative Services, and the National Registry for Effective Programs, and

(iii)

includes strategies which focus on prevention and support for employee populations at risk of poor health outcomes.

(B)

Periodic updating and review

The Secretaries of Health and Human Services and Labor, in consultation with other appropriate agencies shall jointly establish procedures for periodic review, evaluation, and update of the programs under this subsection.

(3)

Health literacy and accessibility

The Secretaries of Health and Human Services and Labor shall jointly, as part of the certification process—

(A)

ensure that employers make the programs culturally competent, physically and programmatically accessible (including for individuals with disabilities), and appropriate to the health literacy needs of the employees covered by the programs;

(B)

require a health literacy component to provide special assistance and materials to employees with low literacy skills, limited English and from underserved populations; and

For purposes of this section, the wellness program components described in this subsection are the following:

(1)

Health awareness component

A health awareness component which provides for the following:

(A)

Health education

The dissemination of health information which addresses the specific needs and health risks of employees.

(B)

Health screenings

The opportunity for periodic screenings for health problems and referrals for appropriate follow-up measures.

(2)

Employee engagement component

An employee engagement component which provides for the active engagement of employees in worksite wellness programs through worksite assessments and program planning, onsite delivery, evaluation, and improvement efforts.

(3)

Behavioral change component

A behavioral change component which encourages healthy living through counseling, seminars, on-line programs, self-help materials, or other programs which provide technical assistance and problem solving skills. Such component may include programs relating to—

(A)

tobacco use;

(B)

obesity;

(C)

stress management;

(D)

physical fitness;

(E)

nutrition;

(F)

substance abuse;

(G)

depression; and

(H)

mental health promotion.

(4)

Supportive environment component

A supportive environment component which includes the following:

(A)

On-site policies

Policies and services at the worksite which promote a healthy lifestyle, including policies relating to—

(i)

tobacco use at the worksite;

(ii)

the nutrition of food available at the worksite through cafeterias and vending options;

(iii)

minimizing stress and promoting positive mental health in the workplace; and

(iv)

the encouragement of physical activity before, during, and after work hours.

(d)

Participation requirement

No grant shall be allowed under subsection (a) unless the Secretaries of Health and Human Services and Labor, in consultation with other appropriate agencies, jointly certify, as a part of any certification described in subsection (b), that each wellness program component of the qualified wellness program—

(1)

shall be available to all employees of the employer;

(2)

shall not mandate participation by employees; and

(3)

may provide a financial reward for participation of an individual in such program so long as such reward is not tied to the premium or cost-sharing of the individual under the health benefits plan.

(e)

Privacy protections

Data gathered for purposes of the employer wellness program may be used solely for the purposes of administering the program. The Secretaries of Health and Human Services and Labor shall develop standards to ensure such data remain confidential and are not used for purposes beyond those for administering the program.

(f)

Certain costs not included

For purposes of this section, costs paid or incurred by an employer for food or health insurance shall not be taken into account under subsection (a).

(g)

Outreach

The Secretaries of Health and Human Services and Labor, in conjunction with other appropriate agencies and members of the business community, shall jointly institute an outreach program to inform businesses about the availability of the wellness program grant as well as to educate businesses on how to develop programs according to recognized and promising practices and on how to measure the success of implemented programs.

(h)

Effective date

This section shall take effect on July 1, 2010.

(i)

Authorization of appropriations

There are authorized to be appropriated such sums as are necessary to carry out this section.

113.

Extension of COBRA continuation coverage

(a)

Extension of current periods of continuation coverage

(1)

In general

In the case of any individual who is, under a COBRA continuation coverage provision, covered under COBRA continuation coverage on or after the date of the enactment of this Act, the required period of any such coverage which has not subsequently terminated under the terms of such provision for any reason other than the expiration of a period of a specified number of months shall, notwithstanding such provision and subject to subsection (b), extend to the earlier of the date on which such individual becomes eligible for acceptable coverage or the date on which such individual becomes eligible for health insurance coverage through the Health Insurance Exchange (or a State-based Health Insurance Exchange operating in a State or group of States).

(2)

Notice

As soon as practicable after the date of the enactment of this Act, the Secretary of Labor, in consultation with the Secretary of the Treasury and the Secretary of Health and Human Services, shall, in consultation with administrators of the group health plans (or other entities) that provide or administer the COBRA continuation coverage involved, provide rules setting forth the form and manner in which prompt notice to individuals of the continued availability of COBRA continuation coverage to such individuals under paragraph (1).

(b)

Continued effect of other terminating events

Notwithstanding subsection (a), any required period of COBRA continuation coverage which is extended under such subsection shall terminate upon the occurrence, prior to the date of termination otherwise provided in such subsection, of any terminating event specified in the applicable continuation coverage provision other than the expiration of a period of a specified number of months.

(c)

Access to State health benefits risk pools

This section shall supersede any provision of the law of a State or political subdivision thereof to the extent that such provision has the effect of limiting or precluding access by a qualified beneficiary whose COBRA continuation coverage has been extended under this section to a State health benefits risk pool recognized by the Commissioner for purposes of this section solely by reason of the extension of such coverage beyond the date on which such coverage otherwise would have expired.

(d)

Definitions

For purposes of this section—

(1)

COBRA continuation coverage

The term COBRA continuation coverage means continuation coverage provided pursuant to part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (other than under section 609), title XXII of the Public Health Service Act, section 4980B of the Internal Revenue Code of 1986 (other than subsection (f)(1) of such section insofar as it relates to pediatric vaccines), or section 905a of title 5, United States Code, or under a State program that provides comparable continuation coverage. Such term does not include coverage under a health flexible spending arrangement under a cafeteria plan within the meaning of section 125 of the Internal Revenue Code of 1986.

(2)

COBRA continuation provision

The term COBRA continuation provision means the provisions of law described in paragraph (1).

114.

State Health Access Program grants

(a)

In general

The Secretary of Health and Human Services (in this section referred to as the Secretary) shall provide grants to States (as defined for purposes of title XIX of the Social Security Act) to establish programs to expand access to affordable health care coverage for the uninsured populations in that State in a manner consistent with reforms to take effect under this division in Y1.

(b)

Types of programs

The types of programs for which grants are available under subsection (a) include the following:

(1)

State insurance exchanges

State insurance exchanges that develop new, less expensive, portable benefit packages for small employers and part-time and seasonal workers.

(2)

Community coverage program

Community coverage with shared responsibility between employers, governmental or nonprofit entity, and the individual.

In order to be awarded a grant under this section for a program, a State shall demonstrate that—

(A)

it has achieved the key State and local statutory or regulatory changes required to begin implementing the new program within 1 year after the initiation of funding under the grant; and

(B)

it will be able to sustain the program without Federal funding after the end of the period of the grant.

(2)

Ineligibility

A State that has already developed a comprehensive health insurance access program is not eligible for a grant under this section.

(3)

Application required

No State shall receive a grant under this section unless the State has approved by the Secretary such an application, in such form and manner as the Secretary specifies.

(4)

Administration based on current program

The program under this section is intended to build on the State Health Access Program funded under the Omnibus Appropriations Act, 2009 (Public Law 111–8).

(d)

Funding limitations

(1)

In general

A grant under this section shall—

(A)

only be available for expenditures before Y1; and

(B)

only be used to supplement, and not supplant, funds otherwise provided.

(2)

Matching fund requirement

(A)

In general

Subject to subparagraph (B), no grant may be awarded to a State unless the State demonstrates the seriousness of its effort by matching at least 20 percent of the grant amount through non-Federal resources, which may be a combination of State, local, private dollars from insurers, providers, and other private organizations.

(B)

Waiver

The Secretary may waive the requirement of subparagraph (A) if the State demonstrates to the Secretary financial hardship in complying with such requirement.

(e)

Study

The Secretary shall review, study, and benchmark the progress and results of the programs funded under this section.

(f)

Report

Each State receiving a grant under this section shall submit to the Secretary a report on best practices and lessons learned through the grant to inform the health reform coverage expansions under this division beginning in Y1.

(g)

Funding

There are authorized to be appropriated such sums as may be necessary to carry out this section.

115.

Administrative simplification

(a)

Standardizing electronic administrative transactions

(1)

In general

Part C of title XI of the Social Security Act (42 U.S.C. 1320d et seq.) is amended by inserting after section 1173 the following new sections:

1173A.

Standardize electronic administrative transactions

(a)

Standards for financial and administrative transactions

(1)

In general

The Secretary shall adopt and regularly update standards consistent with the goals described in paragraph (2).

(2)

Goals for financial and administrative transactions

The goals for standards under paragraph (1) are that such standards shall, to the extent practicable—

(A)

be unique with no conflicting or redundant standards;

(B)

be authoritative, permitting no additions or constraints for electronic transactions, including companion guides;

(C)

be comprehensive, efficient and robust, requiring minimal augmentation by paper transactions or clarification by further communications;

(D)

enable the real-time (or near real-time) determination of an individual’s financial responsibility at the point of service and, to the extent possible, prior to service, including whether the individual is eligible for a specific service with a specific physician at a specific facility, on a specific date or range of dates, include utilization of a machine-readable health plan beneficiary identification card or similar mechanism;

(E)

enable, where feasible, near real-time adjudication of claims;

(F)

provide for timely acknowledgment, response, and status reporting applicable to any electronic transaction deemed appropriate by the Secretary;

(G)

describe all data elements (such as reason and remark codes) in unambiguous terms, not permit optional fields, require that data elements be either required or conditioned upon set values in other fields, and prohibit additional conditions except where required by (or to implement) State or Federal law or to protect against fraud and abuse; and

(H)

harmonize all common data elements across administrative and clinical transaction standards.

(3)

Time for adoption

Not later than 2 years after the date of the enactment of this section, the Secretary shall adopt standards under this section by interim, final rule.

(4)

Requirements for specific standards

The standards under this section shall be developed, adopted, and enforced so as to—

(A)

clarify, refine, complete, and expand, as needed, the standards required under section 1173;

(B)

require paper versions of standardized transactions to comply with the same standards as to data content such that a fully compliant, equivalent electronic transaction can be populated from the data from a paper version;

(C)

enable electronic funds transfers, in order to allow automated reconciliation with the related health care payment and remittance advice;

require the use of a standard electronic transaction with which health care providers may quickly and efficiently enroll with a health plan to conduct the other electronic transactions provided for in this part; and

(F)

provide for other requirements relating to administrative simplification as identified by the Secretary, in consultation with stakeholders.

(5)

Building on existing standards

In adopting the standards under this section, the Secretary shall consider existing and planned standards.

(6)

Implementation and enforcement

Not later than 6 months after the date of the enactment of this section, the Secretary shall submit to the appropriate committees of Congress a plan for the implementation and enforcement, by not later than 5 years after such date of enactment, of the standards under this section. Such plan shall include—

(A)

a process and timeframe with milestones for developing the complete set of standards;

(B)

a proposal for accommodating necessary changes between version changes and a process for upgrading standards as often as annually by interim, final rulemaking;

(C)

programs to provide incentives for, and ease the burden of, implementation for certain health care providers, with special consideration given to such providers serving rural or underserved areas and ensure coordination with standards, implementation specifications, and certification criteria being adopted under the HITECH Act;

(D)

programs to provide incentives for, and ease the burden of, health care providers who volunteer to participate in the process of setting standards for electronic transactions;

(E)

an estimate of total funds needed to ensure timely completion of the implementation plan; and

(F)

an enforcement process that includes timely investigation of complaints, random audits to ensure compliance, civil monetary and programmatic penalties for noncompliance consistent with existing laws and regulations, and a fair and reasonable appeals process building off of enforcement provisions under this part, and concurrent State enforcement jurisdiction.

The Secretary may promulgate an annual audit and certification process to ensure that all health plans and clearinghouses are both syntactically and functionally compliant with all the standard transactions mandated pursuant to the administrative simplification provisions of this part and the Health Insurance Portability and Accountability Act of 1996.(b)

Limitations on use of data

Nothing in this section shall be construed to permit the use of information collected under this section in a manner that would violate State or Federal law.

(c)

Protection of data

The Secretary shall ensure (through the promulgation of regulations or otherwise) that all data collected pursuant to subsection (a) are used and disclosed in a manner that meets the HIPAA privacy and security law (as defined in section 3009(a)(2) of the Public Health Service Act), including any privacy or security standard adopted under section 3004 of such Act.

1173B.

Interim companion guides, including operating rules

(a)

In general

The Secretary shall adopt a single, binding, comprehensive companion guide, that includes operating rules for each X12 Version 5010 transaction described in section 1173(a)(2), to be effective until the new version of these transactions which comply with section 1173A are adopted and implemented.

(b)

Companion guide and operating rules development

In adopting such interim companion guide and rules, the Secretary shall comply with section 1172, except that a nonprofit entity that meets the following criteria shall also be consulted:

(1)

The entity focuses its mission on administrative simplification.

(2)

The entity uses a multistakeholder process that creates consensus-based companion guides, including operating rules using a voting process that ensures balanced representation by the critical stakeholders (including health plans and health care providers) so that no one group dominates the entity and shall include others such as standards development organizations, and relevant Federal or State agencies.

(3)

The entity has in place a public set of guiding principles that ensure the companion guide and operating rules and process are open and transparent.

(4)

The entity coordinates its activities with the HIT Policy Committee, and the HIT Standards Committee (established under title XXX of the Public Health Service Act) and complements the efforts of the Office of the National Healthcare Coordinator and its related health information exchange goals.

(5)

The entity incorporates the standards issued under Health Insurance Portability and Accountability Act of 1996 and this part, and in developing the companion guide and operating rules does not change the definition, data condition or use of a data element or segment in a standard, add any elements or segments to the maximum defined data set, use any codes or data elements that are either marked not used in the standard’s implementation specifications or are not in the standard’s implementation specifications, or change the meaning or intent of the standard’s implementation specifications.

(6)

The entity uses existing market research and proven best practices.

(7)

The entity has a set of measures that allow for the evaluation of their market impact and public reporting of aggregate stakeholder impact.

(8)

The entity supports nondiscrimination and conflict of interest policies that demonstrate a commitment to open, fair, and nondiscriminatory practices.

(9)

The entity allows for public reviews and comment on updates of the companion guide, including the operating rules.

(c)

Implementation

The Secretary shall adopt a single, binding companion guide, including operating rules under this section, for each transaction, to become effective with the X12 Version 5010 transaction implementation, or as soon thereafter as feasible. The companion guide, including operating rules for the transactions for eligibility for health plan and health claims status under this section shall be adopted not later than October 1, 2011, in a manner such that such set of rules is effective beginning not later than January 1, 2013. The companion guide, including operating rules for the remainder of the transactions described in section 1173(a)(2) shall be adopted not later than October 1, 2012, in a manner such that such set of rules is effective beginning not later than January 1, 2014.

.

(2)

Definitions

Section 1171 of such Act (42 U.S.C. 1320d) is amended—

(A)

in paragraph (1), by inserting , and associated operational guidelines and instructions, as determined appropriate by the Secretary after medical procedure codes; and

(B)

by adding at the end the following new paragraph:

(10)

Operating rules

The term operating rules means business rules for using and processing transactions, such as service level requirements, which do not impact the implementation specifications or other data content requirements.

.

(3)

Conforming amendment

Section 1179(a) of such Act (42 U.S.C. 1320d–8(a)) is amended, in the matter before paragraph (1)—

(A)

by inserting on behalf of an individual after 1978); and

(B)

by inserting on behalf of an individual after for a financial institution and

(b)

Standards for claims attachments and coordination of benefits

(1)

Standard for health claims attachments

Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall promulgate an interim, final rule to establish a standard for health claims attachment transaction described in section 1173(a)(2)(B) of the Social Security Act (42 U.S.C. 1320d–2(a)(2)(B)) and coordination of benefits.

(2)

Revision in processing payment transactions by financial institutions

(A)

In general

Section 1179 of the Social Security Act (42 U.S.C. 1320d–8) is amended, in the matter before paragraph (1)—

(i)

by striking or is engaged and inserting and is engaged; and

(ii)

by inserting (other than as a business associate for a covered entity) after for a financial institution.

(B)

Compliance date

The amendments made by subparagraph (A) shall apply to transactions occurring on or after such date (not later than January 1, 2014) as the Secretary of Health and Human Services shall specify.

(c)

Standards for first report of injury

Not later than January 1, 2014, the Secretary of Health and Human Services shall promulgate an interim final rule to establish a standard for the first report of injury transaction described in section 1173(a)(2)(G) of the Social Security Act (42 U.S.C. 1320d–2(a)(2)(G)).

(d)

Unique health plan identifier

Not later October 1, 2012, the Secretary of Health and Human Services shall promulgate an interim final rule to establish a unique health plan identifier described in section 1173(b) of the Social Security Act (42 U.S.C. 1320d–2(b)) based on the input of the National Committee of Vital and Health Statistics and consultation with health plans, health care providers, and other interested parties.

(e)

Expansion of electronic transactions in medicare

Section 1862(a) of the Social Security Act (42 U.S.C. 1395y(a)) is amended—

(1)

in paragraph (23), by striking or at the end;

(2)

in paragraph (24), by striking the period and inserting ; or; and

(3)

by inserting after paragraph (24) the following new paragraph:

(25)

subject to subsection (h), not later than January 1, 2015, for which the payment is other than by electronic funds transfer (EFT) so long as the Secretary has adopted and implemented a standard for electronic funds transfer under section 1173A.

.

(f)

Expansion of penalties

Section 1176 of such Act (42 U.S.C. 1320d–5) is amended by adding at the end the following new subsection:

(c)

Expansion of penalty authority

The Secretary may, in addition to the penalties provided under subsections (a) and (b), provide for the imposition of penalties for violations of this part that are comparable—

(1)

in the case of health plans, to the sanctions the Secretary is authorized to impose under part C or D of title XVIII in the case of a plan that violates a provision of such part; or

(2)

in the case of a health care provider, to the sanctions the Secretary is authorized to impose under part A, B, or D of title XVIII in the case of a health care provider that violations a provision of such part with respect to that provider.

.

II

Protections and Standards for Qualified Health Benefits Plans

A

General Standards

201.

Requirements reforming health insurance marketplace

(a)

Purpose

The purpose of this title is to establish standards to ensure that new health insurance coverage and employment-based health plans that are offered meet standards guaranteeing access to affordable coverage, essential benefits, and other consumer protections.

(b)

Requirements for qualified health benefits plans

On or after the first day of Y1, a health benefits plan shall not be a qualified health benefits plan under this division unless the plan meets the applicable requirements of the following subtitles for the type of plan and plan year involved:

(1)

Subtitle B (relating to affordable coverage).

(2)

Subtitle C (relating to essential benefits).

(3)

Subtitle D (relating to consumer protection).

(c)

Terminology

In this division:

(1)

Enrollment in employment-based health plans

An individual shall be treated as being enrolled in an employment-based health plan if the individual is a participant or beneficiary (as such terms are defined in section 3(7) and 3(8), respectively, of the Employee Retirement Income Security Act of 1974) in such plan.

(2)

Individual and group health insurance coverage

The terms individual health insurance coverage and group health insurance coverage mean health insurance coverage offered in the individual market or large or small group market, respectively, as defined in section 2791 of the Public Health Service Act.

202.

Protecting the choice to keep current coverage

(a)

Grandfathered health insurance coverage defined

Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage under this division, the term grandfathered health insurance coverage means individual health insurance coverage that is offered and in force and effect before the first day of Y1 if the following conditions are met:

(1)

Limitation on new enrollment

(A)

In general

Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1.

(B)

Dependent coverage permitted

Subparagraph (A) shall not affect the subsequent enrollment of a dependent of an individual who is covered as of such first day.

(2)

Limitation on changes in terms or conditions

Subject to paragraph (3) and except as required by law, the issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y1.

(3)

Restrictions on premium increases

The issuer cannot vary the percentage increase in the premium for a risk group of enrollees in specific grandfathered health insurance coverage without changing the premium for all enrollees in the same risk group at the same rate, as specified by the Commissioner.

(b)

Grace period for current employment-Based health plans

(1)

Grace period

(A)

In general

The Commissioner shall establish a grace period whereby, for plan years beginning after the end of the 5-year period beginning with Y1, an employment-based health plan in operation as of the day before the first day of Y1 must meet the same requirements as apply to a qualified health benefits plan under section 201, including the essential benefit package requirement under section 221.

(B)

Exception for limited benefits plans

Subparagraph (A) shall not apply to an employment-based health plan in which the coverage consists only of one or more of the following:

(i)

Any coverage described in section 3001(a)(1)(B)(ii)(IV) of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5).

(ii)

Excepted benefits (as defined in section 733(c) of the Employee Retirement Income Security Act of 1974), including coverage under a specified disease or illness policy described in paragraph (3)(A) of such section.

(iii)

Such other limited benefits as the Commissioner may specify.

In no case shall an employment-based health plan in which the coverage consists only of one or more of the coverage or benefits described in clauses (i) through (iii) be treated as acceptable coverage under this division.(2)

Transitional treatment as acceptable coverage

During the grace period specified in paragraph (1)(A), an employment-based health plan (which may be a high deducible health plan, as defined in section 223(c)(2) of the Internal Revenue Code of 1986) that is described in such paragraph shall be treated as acceptable coverage under this division.

(c)

Limitation on individual health insurance coverage

(1)

In general

Individual health insurance coverage that is not grandfathered health insurance coverage under subsection (a) may only be offered on or after the first day of Y1 as an Exchange-participating health benefits plan.

(2)

Separate, excepted coverage permitted

Nothing in—

(A)

paragraph (1) shall prevent the offering of excepted benefits described in section 2791(c) of the Public Health Service Act so long as such benefits are offered outside the Health Insurance Exchange and are priced separately from health insurance coverage; and

(B)

this division shall be construed—

(i)

to prevent the offering of a stand-alone plan that offers coverage of excepted benefits described in section 2791(c)(2)(A) of the Public Health Service Act (relating to limited scope dental or vision benefits) for individuals and families from a State-licensed dental and vision carrier; or

(ii)

as applying requirements for a qualified health benefits plan to such a stand-alone plan that is offered and priced separately from a qualified health benefits plan.

B

Standards Guaranteeing Access to Affordable Coverage

211.

Prohibiting preexisting condition exclusions

A qualified health benefits plan may not impose any preexisting condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any of the following: health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability, or source of injury (including conditions arising out of acts of domestic violence) or any similar factors.

212.

Guaranteed issue and renewal for insured plans and prohibiting rescissions

The requirements of sections 2711 (other than subsections (e) and (f)) and 2712 (other than paragraphs (3), and (6) of subsection (b) and subsection (e)) of the Public Health Service Act, relating to guaranteed availability and renewability of health insurance coverage, shall apply to individuals and employers in all individual and group health insurance coverage, whether offered to individuals or employers through the Health Insurance Exchange, through any employment-based health plan, or otherwise, in the same manner as such sections apply to employers and health insurance coverage offered in the small group market, except that such section 2712(b)(1) shall apply only if, before nonrenewal or discontinuation of coverage, the issuer has provided the enrollee with notice of nonpayment of premiums and there is a grace period during which the enrollee has an opportunity to correct such nonpayment. Rescissions of such coverage shall be prohibited except in cases of fraud as defined in section 2712(b)(2) of such Act.

213.

Insurance rating rules

(a)

In general

The premium rate charged for a qualified health benefits plan that is health insurance coverage may not vary except as follows:

(1)

Limited age variation permitted

By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1.

(2)

By area

By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators).

(3)

By family enrollment

By family enrollment (such as variations within categories and compositions of families) so long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, as specified under State law and consistent with rules of the Commissioner.

(b)

Actuarial value of optional service coverage

(1)

In general

The Commissioner shall estimate the basic per enrollee, per month cost, determined on an average actuarial basis, for including coverage under a basic plan of the services described in section 222(d)(4)(A).

(2)

Considerations

In making such estimate the Commissioner—

(A)

may take into account the impact on overall costs of the inclusion of such coverage, but may not take into account any cost reduction estimated to result from such services, including prenatal care, delivery, or postnatal care;

(B)

shall estimate such costs as if such coverage were included for the entire population covered; and

(C)

may not estimate such a cost at less than $1 per enrollee, per month.

(c)

Study and reports

(1)

Study

The Commissioner, in coordination with the Secretary of Health and Human Services and the Secretary of Labor, shall conduct a study of the large-group-insured and self-insured employer health care markets. Such study shall examine the following:

(A)

The types of employers by key characteristics, including size, that purchase insured products versus those that self-insure.

(B)

The similarities and differences between typical insured and self-insured health plans.

(C)

The financial solvency and capital reserve levels of employers that self-insure by employer size.

(D)

The risk of self-insured employers not being able to pay obligations or otherwise becoming financially insolvent.

(E)

The extent to which rating rules are likely to cause adverse selection in the large group market or to encourage small and midsize employers to self-insure.

(2)

Reports

Not later than 18 months after the date of the enactment of this Act, the Commissioner shall submit to Congress and the applicable agencies a report on the study conducted under paragraph (1). Such report shall include any recommendations the Commissioner deems appropriate to ensure that the law does not provide incentives for small and midsize employers to self-insure or create adverse selection in the risk pools of large group insurers and self-insured employers. Not later than 18 months after the first day of Y1, the Commissioner shall submit to Congress and the applicable agencies an updated report on such study, including updates on such recommendations.

A qualified health benefits plan shall comply with standards established by the Commissioner to prohibit discrimination in health benefits or benefit structures for qualifying health benefits plans, building from section 702 of the Employee Retirement Income Security Act of 1974, section 2702 of the Public Health Service Act, and section 9802 of the Internal Revenue Code of 1986.

(b)

Parity in mental health and substance abuse disorder benefits

To the extent such provisions are not superceded by or inconsistent with subtitle C, the provisions of section 2705 (other than subsections (a)(1), (a)(2), and (c)) of the Public Health Service Act shall apply to a qualified health benefits plan, regardless of whether it is offered in the individual or group market, in the same manner as such provisions apply to health insurance coverage offered in the large group market.

215.

Ensuring adequacy of provider networks

(a)

In general

A qualified health benefits plan that uses a provider network for items and services shall meet such standards respecting provider networks as the Commissioner may establish to assure the adequacy of such networks in ensuring enrollee access to such items and services and transparency in the cost-sharing differentials among providers participating in the network and policies for accessing out-of-network providers.

(b)

Internet access to information

A qualified health benefits plan that uses a provider network shall provide a current listing of all providers in its network on its Website and such data shall be available on the Health Insurance Exchange Website as a part of the basic information on that plan. The Commissioner shall also establish an on-line system whereby an individual may select by name any medical provider (as defined by the Commissioner) and be informed of the plan or plans with which that provider is contracting.

(c)

Provider network defined

In this division, the term provider network means the providers with respect to which covered benefits, treatments, and services are available under a health benefits plan.

216.

Requiring the option of extension of dependent coverage for uninsured young adults

(a)

In general

A qualified health benefits plan shall make available, at the option of the principal enrollee under the plan, coverage for one or more qualified children (as defined in subsection (b)) of the enrollee.

(b)

Qualified child defined

In this section, the term qualified child means, with respect to a principal enrollee in a qualified health benefits plan, an individual who (but for age) would be treated as a dependent child of the enrollee under such plan and who—

(1)

is under 27 years of age; and

(2)

is not enrolled in a health benefits plan other than under this section.

(c)

Premiums

Nothing in this section shall be construed as preventing a qualified health benefits plan from increasing the premiums otherwise required for coverage provided under this section consistent with standards established by the Commissioner based upon family size under section 213(a)(3).

217.

Consistency of costs and coverage under qualified health benefits plans during plan year

In the case of health insurance coverage offered under a qualified health benefits plan, if the coverage decreases or the cost-sharing increases, the issuer of the coverage shall notify enrollees of the change at least 90 days before the change takes effect (or such shorter period of time in cases where the change is necessary to ensure the health and safety of enrollees).

C

Standards Guaranteeing Access to Essential Benefits

221.

Coverage of essential benefits package

(a)

In general

A qualified health benefits plan shall provide coverage that at least meets the benefit standards adopted under section 224 for the essential benefits package described in section 222 for the plan year involved.

(b)

Choice of coverage

(1)

Non-exchange-participating health benefits plans

In the case of a qualified health benefits plan that is not an Exchange-participating health benefits plan, such plan may offer such coverage in addition to the essential benefits package as the QHBP offering entity may specify.

(2)

Exchange-participating health benefits plans

In the case of an Exchange-participating health benefits plan, such plan is required under section 203 to provide specified levels of benefits and, in the case of a plan offering a premium-plus level of benefits, provide additional benefits.

(3)

Continuation of offering of separate excepted benefits coverage

Nothing in this division shall be construed as affecting the offering outside of the Health Insurance Exchange and under State law of health benefits in the form of excepted benefits (described in section 202(b)(1)(B)(ii)) if such benefits are offered under a separate policy, contract, or certificate of insurance.

(c)

Clinical appropriateness

Nothing in this Act shall be construed to prohibit a group health plan or health insurance issuer from using medical management practices so long as such management practices are based on valid medical evidence and are relevant to the patient whose medical treatment is under review.

(d)

Provision of benefits

Nothing in this division shall be construed as prohibiting a qualified health benefits plan from subcontracting with stand-alone health insurance issuers or insurers for the provision of dental, vision, mental health, and other benefits and services.

222.

Essential benefits package defined

(a)

In general

In this division, the term essential benefits package means health benefits coverage, consistent with standards adopted under section 224, to ensure the provision of quality health care and financial security, that—

(1)

provides payment for the items and services described in subsection (b) in accordance with generally accepted standards of medical or other appropriate clinical or professional practice;

(2)

limits cost-sharing for such covered health care items and services in accordance with such benefit standards, consistent with subsection (c);

(3)

does not impose any annual or lifetime limit on the coverage of covered health care items and services;

(4)

complies with section 215(a) (relating to network adequacy); and

(5)

is equivalent in its scope of benefits, as certified by Office of the Actuary of the Centers for Medicare & Medicaid Services, to the average prevailing employer-sponsored coverage in Y1.

In order to carry out paragraph (5), the Secretary of Labor shall conduct a survey of employer-sponsored coverage to determine the benefits typically covered by employers, including multiemployer plans, and provide a report on such survey to the Health Benefits Advisory Committee and to the Secretary of Health and Human Services.(b)

Minimum services To be covered

Subject to subsection (d), the items and services described in this subsection are the following:

Such services, equipment, and supplies incident to the services of a physician’s or a health professional’s delivery of care in institutional settings, physician offices, patients’ homes or place of residence, or other settings, as appropriate.

Preventive services, including those services recommended with a grade of A or B by the Task Force on Clinical Preventive Services and those vaccines recommended for use by the Director of the Centers for Disease Control and Prevention.

(9)

Maternity care.

(10)

Well-baby and well-child care and oral health, vision, and hearing services, equipment, and supplies for children under 21 years of age.

There shall be no cost-sharing under the essential benefits package for—

(A)

preventive items and services recommended with a grade of A or B by the Task Force on Clinical Preventive Services and those vaccines recommended for use by the Director of the Centers for Disease Control and Prevention; or

(B)

well-baby and well-child care.

(2)

Annual limitation

(A)

Annual limitation

The cost-sharing incurred under the essential benefits package with respect to an individual (or family) for a year does not exceed the applicable level specified in subparagraph (B).

(B)

Applicable level

The applicable level specified in this subparagraph for Y1 is not to exceed $5,000 for an individual and not to exceed $10,000 for a family. Such levels shall be increased (rounded to the nearest $100) for each subsequent year by the annual percentage increase in the enrollment-weighted average of premium increases for basic plans applicable to such year, except that Secretary shall adjust such increase to ensure that the applicable level specified in this subparagraph meets the minimum actuarial value required under paragraph (3).

(C)

Use of copayments

In establishing cost-sharing levels for basic, enhanced, and premium plans under this subsection, the Secretary shall, to the maximum extent possible, use only copayments and not coinsurance.

(3)

Minimum actuarial value

(A)

In general

The cost-sharing under the essential benefits package shall be designed to provide a level of coverage that is designed to provide benefits that are actuarially equivalent to approximately 70 percent of the full actuarial value of the benefits provided under the reference benefits package described in subparagraph (B).

(B)

Reference benefits package described

The reference benefits package described in this subparagraph is the essential benefits package if there were no cost-sharing imposed.

(d)

Assessment and counseling for domestic violence

The Secretary shall support the need for an assessment and brief counseling for domestic violence as part of a behavioral health assessment or primary care visit and determine the appropriate coverage for such assessment and counseling.

(e)

Abortion coverage prohibited as part of minimum benefits package

(1)

Prohibition of required coverage

The Health Benefits Advisory Committee may not recommend under section 223(b), and the Secretary may not adopt in standards under section 224(b), the services described in paragraph (4)(A) or (4)(B) as part of the essential benefits package and the Commissioner may not require such services for qualified health benefits plans to participate in the Health Insurance Exchange.

(2)

Voluntary choice of coverage by plan

In the case of a qualified health benefits plan, the plan is not required (or prohibited) under this Act from providing coverage of services described in paragraph (4)(A) or (4)(B) and the QHBP offering entity shall determine whether such coverage is provided.

(3)

Coverage under public health insurance option

The public health insurance option shall provide coverage for services described in paragraph (4)(B). Nothing in this Act shall be construed as preventing the public health insurance option from providing for or prohibiting coverage of services described in paragraph (4)(A).

(4)

Abortion services

(A)

Abortions for which public funding is prohibited

The services described in this subparagraph are abortions for which the expenditure of Federal funds appropriated for the Department of Health and Human Services is not permitted, based on the law as in effect as of the date that is 6 months before the beginning of the plan year involved.

(B)

Abortions for which public funding is allowed

The services described in this subparagraph are abortions for which the expenditure of Federal funds appropriated for the Department of Health and Human Services is permitted, based on the law as in effect as of the date that is 6 months before the beginning of the plan year involved.

Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit to Congress a report containing the results of a study determining the need and cost of providing accessible and affordable oral health care to adults as part of the essential benefits package.

223.

Health Benefits Advisory Committee

(a)

Establishment

(1)

In general

There is established a private-public advisory committee which shall be a panel of medical and other experts to be known as the Health Benefits Advisory Committee to recommend covered benefits and essential, enhanced, and premium plans.

(2)

Chair

The Surgeon General shall be a member and the chair of the Health Benefits Advisory Committee.

(3)

Membership

The Health Benefits Advisory Committee shall be composed of the following members, in addition to the Surgeon General:

(A)

Nine members who are not Federal employees or officers and who are appointed by the President.

(B)

Nine members who are not Federal employees or officers and who are appointed by the Comptroller General of the United States in a manner similar to the manner in which the Comptroller General appoints members to the Medicare Payment Advisory Commission under section 1805(c) of the Social Security Act.

(C)

Such even number of members (not to exceed 8) who are Federal employees and officers, as the President may appoint.

Such initial appointments shall be made not later than 60 days after the date of the enactment of this Act.(4)

Terms

Each member of the Health Benefits Advisory Committee shall serve a 3-year term on the Committee, except that the terms of the initial members shall be adjusted in order to provide for a staggered term of appointment for all such members.

(5)

Participation

The membership of the Health Benefits Advisory Committee shall at least reflect providers, patient representatives, employers (including small employers), labor, health insurance issuers, experts in health care financing and delivery, experts in oral health care, experts in racial and ethnic disparities, experts on health care needs and disparities of individuals with disabilities, representatives of relevant governmental agencies, and at least one practicing physician or other health professional and an expert in child and adolescent health and shall represent a balance among various sectors of the health care system so that no single sector unduly influences the recommendations of such Committee.

(b)

Duties

(1)

Recommendations on benefit standards

The Health Benefits Advisory Committee shall recommend to the Secretary of Health and Human Services (in this subtitle referred to as the Secretary) benefit standards (as defined in paragraph (5)), and periodic updates to such standards. In developing such recommendations, the Committee shall take into account innovation in health care and consider how such standards could reduce health disparities.

(2)

Deadline

The Health Benefits Advisory Committee shall recommend initial benefit standards to the Secretary not later than 1 year after the date of the enactment of this Act.

(3)

State input

The Health Benefits Advisory Committee shall examine the health coverage laws and benefits of each State in developing recommendations under this subsection and may incorporate such coverage and benefits as the Committee determines to be appropriate and consistent with this Act. The Health Benefits Advisory Committee shall also seek input from the States and consider recommendations on how to ensure quality of health coverage in all States.

(4)

Public input

The Health Benefits Advisory Committee shall allow for public input as a part of developing recommendations under this subsection.

(5)

Benefit standards defined

In this subtitle, the term benefit standards means standards respecting—

(A)

the essential benefits package described in section 222, including categories of covered treatments, items and services within benefit classes, and cost-sharing consistent with subsection (d) of such section; and

The level of cost-sharing for enhanced plans shall be designed so that such plans have benefits that are actuarially equivalent to approximately 85 percent of the actuarial value of the benefits provided under the reference benefits package described in section 222(c)(3)(B).

(B)

Premium plan

The level of cost-sharing for premium plans shall be designed so that such plans have benefits that are actuarially equivalent to approximately 95 percent of the actuarial value of the benefits provided under the reference benefits package described in section 222(c)(3)(B).

(c)

Operations

(1)

Per diem pay

Each member of the Health Benefits Advisory Committee shall receive travel expenses, including per diem in accordance with applicable provisions under subchapter I of chapter 57 of title 5, United States Code, and shall otherwise serve without additional pay.

(2)

Members not treated as Federal employees

Members of the Health Benefits Advisory Committee shall not be considered employees of the Federal Government solely by reason of any service on the Committee, except such members shall be considered to be within the meaning of section 202(a) of title 18, United States Code, for the purposes of disclosure and management of conflicts of interest.

The Secretary shall provide for publication in the Federal Register and the posting on the Internet Website of the Department of Health and Human Services of all recommendations made by the Health Benefits Advisory Committee under this section.

224.

Process for adoption of recommendations; adoption of benefit standards

(a)

Process for Adoption of Recommendations

(1)

Review of recommended standards

Not later than 45 days after the date of receipt of benefit standards recommended under section 223 (including such standards as modified under paragraph (2)(B)), the Secretary shall review such standards and shall determine whether to propose adoption of such standards as a package.

(2)

Determination to adopt standards

If the Secretary determines—

(A)

to propose adoption of benefit standards so recommended as a package, the Secretary shall, by regulation under section 553 of title 5, United States Code, propose adoption of such standards; or

(B)

not to propose adoption of such standards as a package, the Secretary shall notify the Health Benefits Advisory Committee in writing of such determination and the reasons for not proposing the adoption of such recommendation and provide the Committee with a further opportunity to modify its previous recommendations and submit new recommendations to the Secretary on a timely basis.

(3)

Contingency

If, because of the application of paragraph (2)(B), the Secretary would otherwise be unable to propose initial adoption of such recommended standards by the deadline specified in subsection (b)(1), the Secretary shall, by regulation under section 553 of title 5, United States Code, propose adoption of initial benefit standards by such deadline.

(4)

Publication

The Secretary shall provide for publication in the Federal Register of all determinations made by the Secretary under this subsection.

(b)

Adoption of Standards

(1)

Initial standards

Not later than 18 months after the date of the enactment of this Act, the Secretary shall, through the rulemaking process consistent with subsection (a), adopt an initial set of benefit standards.

(2)

Periodic updating standards

Under subsection (a), the Secretary shall provide for the periodic updating of the benefit standards previously adopted under this section.

(3)

Requirement

The Secretary may not adopt any benefit standards for an essential benefits package or for level of cost-sharing that are inconsistent with the requirements for such a package or level under sections 222 (including subsection (d)) and 223(b)(5).

A QHBP offering entity shall provide for timely grievance and appeals mechanisms with respect to qualified health benefits plans that the Commissioner shall establish consistent with this section. The Commissioner shall establish time limits for each of such mechanisms and implement them in a manner that is protective to the needs of patients.

(b)

Internal claims and appeals process

Under a qualified health benefits plan the QHBP offering entity shall provide an internal claims and appeals process that initially incorporates the claims and appeals procedures (including urgent claims) set forth at section 2560.503–1 of title 29, Code of Federal Regulations, as published on November 21, 2000 (65 Fed. Reg. 70246) and shall update such process in accordance with any standards that the Commissioner may establish.

(c)

External review process

(1)

In general

The Commissioner shall establish an external review process (including procedures for expedited reviews of urgent claims) that provides for an impartial, independent, and de novo review of denied claims under this division.

(2)

Requiring fair grievance and appeals mechanisms

A determination made, with respect to a qualified health benefits plan offered by a QHBP offering entity, under the external review process established under this subsection shall be binding on the plan and the entity.

(d)

Time limits

The Commissioner shall establish time limits for each of these processes and implement them in a manner that is protective to the patient.

(e)

Construction

Nothing in this section shall be construed as affecting the availability of judicial review under State law for adverse decisions under subsection (b) or (c), subject to section 251.

233.

Requiring information transparency and plan disclosure

(a)

Accurate and timely disclosure

(1)

For Exchange-participating health benefits plans

A QHBP offering entity offering an Exchange-participating health benefits plan shall comply with standards established by the Commissioner for the accurate and timely disclosure to the Commissioner and the public of plan documents, plan terms and conditions, claims payment policies and practices, periodic financial disclosure, data on enrollment, data on disenrollment, data on the number of claims denials, data on rating practices, information on cost-sharing and payments with respect to any out-of-network coverage, and other information as determined appropriate by the Commissioner.

(2)

Employment-based health plans

The Secretary of Labor shall update and harmonize the Secretary’s rules concerning the accurate and timely disclosure to participants by group health plans of plan disclosure, plan terms and conditions, and periodic financial disclosure with the standards established by the Commissioner under paragraph (1).

(3)

Use of plain language

(A)

In general

The disclosures under paragraphs (1) and (2) shall be provided in plain language.

(B)

Definition

In this paragraph, the term plain language means language that the intended audience, including individuals with limited English proficiency, can readily understand and use because that language is concise, well-organized, and follows other best practices of plain language writing.

(C)

Guidance

The Commissioner and the Secretary of Labor shall jointly develop and issue guidance on best practices of plain language writing.

(4)

Information on rights

The information disclosed under this subsection shall include information on enrollee and participant rights under this division.

(5)

Cost-sharing transparency

A qualified health benefits plan shall allow individuals to learn the amount of cost-sharing (including deductibles, copayments, and coinsurance) under the individual’s plan or coverage that the individual would be responsible for paying with respect to the furnishing of a specific item or service by a participating provider in a timely manner upon request. At a minimum, this information shall be made available to such individual via an Internet Website and other means for individuals without access to the Internet.

(b)

Contracting reimbursement

A qualified health benefits plan shall comply with standards established by the Commissioner to ensure transparency to each health care provider relating to reimbursement arrangements between such plan and such provider.

(c)

Pharmacy benefit managers transparency requirements

(1)

In general

If a QHBP offering entity contracts with a pharmacy benefit manager or other entity (in this subsection referred to as a PBM) to manage prescription drug coverage or otherwise control prescription drug costs under a qualified health benefits plan, the PBM shall provide at least annually to the Commissioner and to the QHBP offering entity offering such plan the following information, in a form and manner to be determined by the Commissioner:

(A)

Information on the number and total cost of prescriptions under the contract that are filled via mail order and at retail pharmacies.

(B)

An estimate of aggregate average payments under the contract, per prescription (weighted by prescription volume), made to mail order and retail pharmacies, and the average amount, per prescription, that the PBM was paid by the plan for prescriptions filled at mail order and retail pharmacists.

(C)

An estimate of the aggregate average payment per prescription (weighted by prescription volume) under the contract received from pharmaceutical manufacturers, including all rebates, discounts, prices concessions, or administrative, and other payments from pharmaceutical manufacturers, and a description of the types of payments, and the amount of these payments that were shared with the plan, and a description of the percentage of prescriptions for which the PBM received such payments.

(D)

Information on the overall percentage of generic drugs dispensed under the contract at retail and mail order pharmacies, and the percentage of cases in which a generic drug is dispensed when available.

(E)

Information on the percentage and number of cases under the contract in which individuals were switched because of PBM policies or at the direct or indirect control of the PBM from a prescribed drug that had a lower cost for the QHBP offering entity to a drug that had a higher cost for the QHBP offering entity, the rationale for these switches, and a description of the PBM policies governing such switches.

(2)

Confidentiality of information

Information disclosed by a PBM to the Commissioner or a QHBP offering entity under this subsection is confidential and shall not be disclosed by the Commissioner or the QHBP offering entity in a form which discloses the identity of a specific PBM or prices charged by such PBM or a specific retailer, manufacturer, or wholesaler, except only by the Commissioner—

(A)

to permit State or Federal law enforcement authorities to use the information provided for program compliance purposes and for the purpose of combating waste, fraud, and abuse;

(B)

to permit the Comptroller General, the Medicare Payment Advisory Commission, or the Secretary of Health and Human Services to review the information provided; and

(C)

to permit the Director of the Congressional Budget Office to review the information provided.

(3)

Annual public report

On an annual basis, the Commissioner shall prepare a public report providing industrywide aggregate or average information to be used in assessing the overall impact of PBMs on prescription drug prices and spending. Such report shall not disclose the identity of a specific PBM, or prices charged by such PBM, or a specific retailer, manufacturer, or wholesaler, or any other confidential or trade secret information.

(4)

Penalties

The provisions of subsection (b)(3)(C) of section 1927 shall apply to a PBM that fails to provide information required under subsection (a) or that knowingly provides false information in the same manner as such provisions apply to a manufacturer with an agreement under such section that fails to provide information under subsection (b)(3)(A) of such section or knowingly provides false information under such section, respectively.

234.

Application to qualified health benefits plans not offered through the Health Insurance Exchange

The requirements of the previous provisions of this subtitle shall apply to qualified health benefits plans that are not being offered through the Health Insurance Exchange only to the extent specified by the Commissioner.

235.

Timely payment of claims

A QHBP offering entity shall comply with the requirements of section 1857(f) of the Social Security Act with respect to a qualified health benefits plan it offers in the same manner as a Medicare Advantage organization is required to comply with such requirements with respect to a Medicare Advantage plan it offers under part C of Medicare.

236.

Standardized rules for coordination and subrogation of benefits

The Commissioner shall establish standards for the coordination and subrogation of benefits and reimbursement of payments in cases of qualified health benefits plans involving individuals and multiple plan coverage.

237.

Application of administrative simplification

A QHBP offering entity is required to comply with administrative simplification provisions under part C of title XI of the Social Security Act with respect to qualified health benefits plans it offers.

238.

State prohibitions on discrimination against health care providers

This Act (and the amendments made by this Act) shall not be construed as superseding laws, as they now or hereinafter exist, of any State or jurisdiction designed to prohibit a qualified health benefits plan from discriminating with respect to participation, reimbursement, covered services, indemnification, or related requirements under such plan against a health care provider that is acting within the scope of that provider’s license or certification under applicable State law.

239.

Protection of physician prescriber information

(a)

Study

The Secretary of Health and Human Services shall conduct a study on the use of physician prescriber information in sales and marketing practices of pharmaceutical manufacturers.

(b)

Report

Based on the study conducted under subsection (a), the Secretary shall submit to Congress a report on actions needed to be taken by the Congress or the Secretary to protect providers from biased marketing and sales practices.

240.

Dissemination of advance care planning information

(a)

In general

The QHBP offering entity —

(1)

shall provide for the dissemination of information related to end-of-life planning to individuals seeking enrollment in Exchange-participating health benefits plans offered through the Exchange;

(2)

shall present such individuals with—

(A)

the option to establish advanced directives and physician’s orders for life sustaining treatment according to the laws of the State in which the individual resides; and

The information presented under paragraph (2) shall not presume the withdrawal of treatment and shall include end-of-life planning information that includes options to maintain all or most medical interventions.(b)

Construction

Nothing in this section shall be construed—

(1)

to require an individual to complete an advanced directive or a physician’s order for life sustaining treatment or other end-of-life planning document;

(2)

to require an individual to consent to restrictions on the amount, duration, or scope of medical benefits otherwise covered under a qualified health benefits plan; or

(3)

to promote suicide, assisted suicide, euthanasia, or mercy killing.

(c)

Advanced directive defined

In this section, the term advanced directive includes a living will, a comfort care order, or a durable power of attorney for health care.

(d)

Prohibition on the promotion of assisted suicide

(1)

In general

Subject to paragraph (3), information provided to meet the requirements of subsection (a)(2) shall not include advanced directives or other planning tools that list or describe as an option suicide, assisted suicide, euthanasia, or mercy killing, regardless of legality.

(2)

Construction

Nothing in paragraph (1) shall be construed to apply to or affect any option to—

(A)

withhold or withdraw of medical treatment or medical care;

(B)

withhold or withdraw of nutrition or hydration; and

(C)

provide palliative or hospice care or use an item, good, benefit, or service furnished for the purpose of alleviating pain or discomfort, even if such use may increase the risk of death, so long as such item, good, benefit, or service is not also furnished for the purpose of causing, or the purpose of assisting in causing, death, for any reason.

(3)

No preemption of State law

Nothing in this section shall be construed to preempt or otherwise have any effect on State laws regarding advance care planning, palliative care, or end-of-life decision-making.

E

Governance

241.

Health Choices Administration; Health Choices Commissioner

(a)

In general

There is hereby established, as an independent agency in the executive branch of the Government, a Health Choices Administration (in this division referred to as the Administration).

(b)

Commissioner

(1)

In general

The Administration shall be headed by a Health Choices Commissioner (in this division referred to as the Commissioner) who shall be appointed by the President, by and with the advice and consent of the Senate.

(2)

Compensation; etc

The provisions of paragraphs (2), (5), and (7) of subsection (a) (relating to compensation, terms, general powers, rulemaking, and delegation) of section 702 of the Social Security Act (42 U.S.C. 902) shall apply to the Commissioner and the Administration in the same manner as such provisions apply to the Commissioner of Social Security and the Social Security Administration.

(c)

Inspector General

For provision establishing an Office of the Inspector General for the Health Choices Administration, see section 1647.

242.

Duties and authority of Commissioner

(a)

Duties

The Commissioner is responsible for carrying out the following functions under this division:

(1)

Qualified plan standards

The establishment of qualified health benefits plan standards under this title, including the enforcement of such standards in coordination with State insurance regulators and the Secretaries of Labor and the Treasury.

(2)

Health Insurance Exchange

The establishment and operation of a Health Insurance Exchange under subtitle A of title III.

(3)

Individual affordability credits

The administration of individual affordability credits under subtitle C of title III, including determination of eligibility for such credits.

(4)

Additional functions

Such additional functions as may be specified in this division.

(b)

Promoting accountability

(1)

In general

The Commissioner shall undertake activities in accordance with this subtitle to promote accountability of QHBP offering entities in meeting Federal health insurance requirements, regardless of whether such accountability is with respect to qualified health benefits plans offered through the Health Insurance Exchange or outside of such Exchange.

(2)

Compliance examination and audits

(A)

In general

The Commissioner shall, in coordination with States, conduct audits of qualified health benefits plan compliance with Federal requirements. Such audits may include random compliance audits and targeted audits in response to complaints or other suspected noncompliance.

(B)

Recoupment of costs in connection with examination and audits

The Commissioner is authorized to recoup from qualified health benefits plans reimbursement for the costs of such examinations and audit of such QHBP offering entities.

(c)

Data collection

The Commissioner shall collect data for purposes of carrying out the Commissioner’s duties, including for purposes of promoting quality and value, protecting consumers, and addressing disparities in health and health care and may share such data with the Secretary of Health and Human Services.

(d)

Sanctions authority

(1)

In general

In the case that the Commissioner determines that a QHBP offering entity violates a requirement of this title, the Commissioner may, in coordination with State insurance regulators and the Secretary of Labor, provide, in addition to any other remedies authorized by law, for any of the remedies described in paragraph (2).

(2)

Remedies

The remedies described in this paragraph, with respect to a qualified health benefits plan offered by a QHBP offering entity, are—

(A)

civil money penalties of not more than the amount that would be applicable under similar circumstances for similar violations under section 1857(g) of the Social Security Act;

(B)

suspension of enrollment of individuals under such plan after the date the Commissioner notifies the entity of a determination under paragraph (1) and until the Commissioner is satisfied that the basis for such determination has been corrected and is not likely to recur;

(C)

in the case of an Exchange-participating health benefits plan, suspension of payment to the entity under the Health Insurance Exchange for individuals enrolled in such plan after the date the Commissioner notifies the entity of a determination under paragraph (1) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur; or

(D)

working with State insurance regulators to terminate plans for repeated failure by the offering entity to meet the requirements of this title.

(e)

Standard definitions of insurance and medical terms

The Commissioner shall provide for the development of standards for the definitions of terms used in health insurance coverage, including insurance-related terms.

(f)

Efficiency in administration

The Commissioner shall issue regulations for the effective and efficient administration of the Health Insurance Exchange and affordability credits under subtitle C, including, with respect to the determination of eligibility for affordability credits, the use of personnel who are employed in accordance with the requirements of title 5, United States Code, to carry out the duties of the Commissioner or, in the case of sections 308 and 341(b)(2), the use of State personnel who are employed in accordance with standards prescribed by the Office of Personnel Management pursuant to section 208 of the Intergovernmental Personnel Act of 1970 (42 U.S.C. 4728).

243.

Consultation and coordination

(a)

Consultation

In carrying out the Commissioner’s duties under this division, the Commissioner, as appropriate, shall consult at least with the following:

(1)

State attorneys general and State insurance regulators, including concerning the standards for health insurance coverage that is a qualified health benefits plan under this title and enforcement of such standards.

(2)

The National Association of Insurance Commissioners, including for purposes of using model guidelines established by such association for purposes of subtitles B and D.

(3)

Appropriate State agencies, specifically concerning the administration of individual affordability credits under subtitle C of title III and the offering of Exchange-participating health benefits plans, to Medicaid eligible individuals under subtitle A of such title.

(4)

The Federal Trade Commission, specifically concerning the development and issuance of guidance, rules, or standards regarding fair marketing practices under section 231 or otherwise, or any consumer disclosure requirements under section 233 or otherwise.

(5)

Other appropriate Federal agencies.

(6)

Indian tribes and tribal organizations.

(b)

Coordination

(1)

In general

In carrying out the functions of the Commissioner, including with respect to the enforcement of the provisions of this division, the Commissioner shall work in coordination with existing Federal and State entities to the maximum extent feasible consistent with this division and in a manner that prevents conflicts of interest in duties and ensures effective enforcement.

(2)

Uniform standards

The Commissioner, in coordination with such entities, shall seek to achieve uniform standards that adequately protect consumers in a manner that does not unreasonably affect employers and insurers.

244.

Health Insurance Ombudsman

(a)

In general

The Commissioner shall appoint within the Health Choices Administration a Qualified Health Benefits Plan Ombudsman who shall have expertise and experience in the fields of health care and education of (and assistance to) individuals.

receive complaints, grievances, and requests for information submitted by individuals through means such as the mail, by telephone, electronically, and in person;

(2)

provide assistance with respect to complaints, grievances, and requests referred to in paragraph (1), including—

(A)

helping individuals determine the relevant information needed to seek an appeal of a decision or determination;

(B)

assistance to such individuals in choosing a qualified health benefits plan in which to enroll;

(C)

assistance to such individuals with any problems arising from disenrollment from such a plan; and

(D)

assistance to such individuals in presenting information under subtitle C (relating to affordability credits); and

(3)

submit annual reports to Congress and the Commissioner that describe the activities of the Ombudsman and that include such recommendations for improvement in the administration of this division as the Ombudsman determines appropriate. The Ombudsman shall not serve as an advocate for any increases in payments or new coverage of services, but may identify issues and problems in payment or coverage policies.

F

Relation to other requirements; Miscellaneous

251.

Relation to other requirements

(a)

Coverage not offered through Exchange

(1)

In general

In the case of health insurance coverage not offered through the Health Insurance Exchange (whether or not offered in connection with an employment-based health plan), and in the case of employment-based health plans, the requirements of this title do not supercede any requirements applicable under titles XXII and XXVII of the Public Health Service Act, parts 6 and 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or State law, except insofar as such requirements prevent the application of a requirement of this division, as determined by the Commissioner.

(2)

Construction

Nothing in paragraphs (1) or (2) shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974.

(b)

Coverage offered through Exchange

(1)

In general

In the case of health insurance coverage offered through the Health Insurance Exchange—

(A)

the requirements of this title do not supercede any requirements (including requirements relating to genetic information nondiscrimination and mental health parity) applicable under title XXVII of the Public Health Service Act or under State law, except insofar as such requirements prevent the application of a requirement of this division, as determined by the Commissioner; and

(B)

individual rights and remedies under State laws shall apply.

(2)

Construction

In the case of coverage described in paragraph (1), nothing in such paragraph shall be construed as preventing the application of rights and remedies under State laws to health insurance issuers generally with respect to any requirement referred to in paragraph (1)(A). The previous sentence shall not be construed as providing for the applicability of rights or remedies under State laws with respect to requirements applicable to employers or other plan sponsors in connection with arrangements which are treated as group health plans under section 802(a)(1) of the Employee Retirement Income Security Act of 1974.

252.

Prohibiting discrimination in health care

(a)

In general

Except as otherwise explicitly permitted by this Act and by subsequent regulations consistent with this Act, all health care and related services (including insurance coverage and public health activities) covered by this Act shall be provided without regard to personal characteristics extraneous to the provision of high quality health care or related services.

(b)

Implementation

To implement the requirement set forth in subsection (a), the Secretary of Health and Human Services shall, not later than 18 months after the date of the enactment of this Act, promulgate such regulations as are necessary or appropriate to insure that all health care and related services (including insurance coverage and public health activities) covered by this Act are provided (whether directly or through contractual, licensing, or other arrangements) without regard to personal characteristics extraneous to the provision of high quality health care or related services.

253.

Whistleblower protection

(a)

Retaliation prohibited

No employer may discharge any employee or otherwise discriminate against any employee with respect to his compensation, terms, conditions, or other privileges of employment because the employee (or any person acting pursuant to a request of the employee)—

(1)

provided, caused to be provided, or is about to provide or cause to be provided to the employer, the Federal Government, or the attorney general of a State information relating to any violation of, or any act or omission the employee reasonably believes to be a violation of any provision of this Act or any order, rule, or regulation promulgated under this Act;

(2)

testified or is about to testify in a proceeding concerning such violation;

(3)

assisted or participated or is about to assist or participate in such a proceeding; or

(4)

objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any provision of this Act or any order, rule, or regulation promulgated under this Act.

(b)

Enforcement action

An employee covered by this section who alleges discrimination by an employer in violation of subsection (a) may bring an action governed by the rules, procedures, legal burdens of proof, and remedies set forth in section 40(b) of the Consumer Product Safety Act (15 U.S.C. 2087(b)).

(c)

Employer defined

As used in this section, the term employer means any person (including one or more individuals, partnerships, associations, corporations, trusts, professional membership organization including a certification, disciplinary, or other professional body, unincorporated organizations, nongovernmental organizations, or trustees) engaged in profit or nonprofit business or industry whose activities are governed by this Act, and any agent, contractor, subcontractor, grantee, or consultant of such person.

(d)

Rule of construction

The rule of construction set forth in section 20109(h) of title 49, United States Code, shall also apply to this section.

254.

Construction regarding collective bargaining

Nothing in this division shall be construed to alter or supersede any statutory or other obligation to engage in collective bargaining over the terms or conditions of employment related to health care. Any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this division shall not be treated as a termination of such collective bargaining agreement.

255.

Severability

If any provision of this Act, or any application of such provision to any person or circumstance, is held to be unconstitutional, the remainder of the provisions of this Act and the application of the provision to any other person or circumstance shall not be affected.

256.

Treatment of Hawaii Prepaid Health Care Act

(a)

In general

Subject to this section—

(1)

nothing in this division (or an amendment made by this division) shall be construed to modify or limit the application of the exemption for the Hawaii Prepaid Health Care Act (Haw. Rev. Stat. §§ 393–1 et seq.) as provided for under section 514(b)(5) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(5)), and such exemption shall also apply with respect to the provisions of this division; and

(2)

for purposes of this division (and the amendments made by this division), coverage provided pursuant to the Hawaii Prepaid Health Care Act shall be treated as a qualified health benefits plan providing acceptable coverage so long as the Secretary of Labor determines that such coverage for employees (taking into account the benefits and the cost to employees for such benefits) is substantially equivalent to or greater than the coverage provided for employees pursuant to the essential benefits package.

(b)

Coordination with State law of Hawaii

The Commissioner shall, based on ongoing consultation with the appropriate officials of the State of Hawaii, make adjustments to rules and regulations of the Commissioner under this division as may be necessary, as determined by the Commissioner, to most effectively coordinate the provisions of this division with the provisions of the Hawaii Prepaid Health Care Act, taking into account any changes made from time to time to the Hawaii Prepaid Health Care Act and related laws of such State.

257.

Actions by State attorneys general

Any State attorney general may bring a civil action in the name of such State as parens patriae on behalf of natural persons residing in such State, in any district court of the United States or State court having jurisdiction of the defendant to secure monetary or equitable relief for violation of any provisions of this title or regulations issued thereunder. Nothing in this section shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974.

258.

Application of State and Federal laws regarding abortion

(a)

No preemption of State laws regarding abortion

Nothing in this Act shall be construed to preempt or otherwise have any effect on State laws regarding the prohibition of (or requirement of) coverage, funding, or procedural requirements on abortions, including parental notification or consent for the performance of an abortion on a minor.

(b)

No effect on Federal laws regarding abortion

(1)

In general

Nothing in this Act shall be construed to have any effect on Federal laws regarding—

(A)

conscience protection;

(B)

willingness or refusal to provide abortion; and

(C)

discrimination on the basis of the willingness or refusal to provide, pay for, cover, or refer for abortion or to provide or participate in training to provide abortion.

(c)

No effect on federal civil rights law

Nothing in this section shall alter the rights and obligations of employees and employers under title VII of the Civil Rights Act of 1964.

259.

Nondiscrimination on abortion and respect for rights of conscience

(a)

Nondiscrimination

A Federal agency or program, and any State or local government that receives Federal financial assistance under this Act (or an amendment made by this Act), may not—

(1)

subject any individual or institutional health care entity to discrimination; or

(2)

require any health plan created or regulated under this Act (or an amendment made by this Act) to subject any individual or institutional health care entity to discrimination,

on the basis that the health care entity does not provide, pay for, provide coverage of, or refer for abortions.(b)

Definition

In this section, the term health care entity includes an individual physician or other health care professional, a hospital, a provider-sponsored organization, a health maintenance organization, a health insurance plan, or any other kind of health care facility, organization, or plan.

(c)

Administration

The Office for Civil Rights of the Department of Health and Human Services is designated to receive complaints of discrimination based on this section, and coordinate the investigation of such complaints.

260.

Authority of Federal Trade Commission

Section 6 of the Federal Trade Commission Act (15 U.S.C. 46) is amended by striking and prepare reports and all that follows and inserting the following: and prepare reports, and to share information under clauses (f) and (k), relating to the business of insurance. Notwithstanding section 4, such authority shall include the authority to conduct studies and prepare reports, and to share information under clauses (f) and (k), relating to the business of insurance, without regard to whether the entity or entities that is the subject of such studies, reports, or information is a for-profit or not-for-profit entity..

261.

Construction regarding standard of care

(a)

In general

The development, recognition, or implementation of any guideline or other standard under a provision described in subsection (b) shall not be construed to establish the standard of care or duty of care owed by health care providers to their patients in any medical malpractice action or claim (as defined in section 431(7) of the Health Care Quality Improvement Act of 1986 (42 U.S.C. 11151(7)).

(b)

Provisions described

The provisions described in this subsection are the following:

(1)

Section 324 (relating to modernized payment initiatives and delivery system reform under the public health option).

(2)

The amendments made by section 1151 (relating to reducing potentially preventable hospital readmissions).

(3)

The amendments made by section 1751 (relating to health care acquired conditions).

(4)

Section 3131 of the Public Health Service Act (relating to the Task Force on Clinical Preventive Services), added by section 2301.

(5)

Part D of title IX of the Public Health Service Act (relating to implementation of best practices in the delivery of health care), added by section 2401.

262.

Restoring application of antitrust laws to health sector insurers

(a)

Amendment to McCarran-Ferguson Act

Section 3 of the Act of March 9, 1945 (15 U.S.C. 1013), commonly known as the McCarran-Ferguson Act, is amended by adding at the end the following:

(c)(1)

Except as provided in paragraph (2), nothing contained in this Act shall modify, impair, or supersede the operation of any of the antitrust laws with respect to price fixing, market allocation, or monopolization (or attempting to monopolize) by—

(A)

a person engaged in the business of health insurance, in connection with providing health insurance; or

(B)

a person engaged in the business of medical malpractice insurance, in connection with providing medical malpractice insurance.

determining a loss development factor applicable to historical loss data;

(C)

performing actuarial services if doing so does not involve a restraint of trade; or

(D)

information gathering and rate setting activities of a State insurance commission or other State regulatory entity with authority to set insurance rates.

(3)

For purposes of this subsection—

(A)

the term antitrust laws has the meaning given it in subsection (a) of the first section of the Clayton Act, except that such term includes section 5 of the Federal Trade Commission Act to the extent that such section 5 applies to unfair methods of competition;

(B)

the term historical loss data means information respecting claims paid, or reserves held for claims reported, by any person engaged in the business of insurance; and

(C)

the term loss development factor means an adjustment to be made to the aggregate of losses incurred during a prior period of time that have been paid, or for which claims have been received and reserves are being held, in order to estimate the aggregate of the losses incurred during such period that will ultimately be paid.

.

(b)

Related provision

For purposes of section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent such section applies to unfair methods of competition, section 3(c) of the McCarran-Ferguson Act shall apply with respect to the business of health insurance, and with respect to the business of medical malpractice insurance, without regard to whether such business is carried on for profit, notwithstanding the definition of Corporation contained in section 4 of the Federal Trade Commission Act.

(c)

Related preservation of antitrust laws

Except as provided in subsections (a) and (b), nothing in this Act, or in the amendments made by this Act, shall be construed to modify, impair, or supersede the operation of any of the antitrust laws. For purposes of the preceding sentence, the term “antitrust laws” has the meaning given it in subsection (a) of the first section of the Clayton Act, except that it includes section 5 of the Federal Trade Commission Act to the extent that such section 5 applies to unfair methods of competition.

263.

Study and report on methods to increase EHR use by small health care providers

(a)

Study

The Secretary of Health and Human Services shall conduct a study of potential methods to increase the use of qualified electronic health records (as defined in section 3000(13) of the Public Health Service Act) by small health care providers. Such study shall consider at least the following methods:

(1)

Providing for higher rates of reimbursement or other incentives for such health care providers to use electronic health records (taking into consideration initiatives by private health insurance companies and incentives provided under Medicare under title XVIII of the Social Security Act, Medicaid under title XIX of such Act, and other programs).

(2)

Promoting low-cost electronic health record software packages that are available for use by such health care providers, including software packages that are available to health care providers through the Veterans Administration and other sources.

(3)

Training and education of such health care providers on the use of electronic health records.

(4)

Providing assistance to such health care providers on the implementation of electronic health records.

(b)

Report

Not later than December 31, 2013, the Secretary of Health and Human Services shall submit to Congress a report containing the results of the study conducted under subsection (a), including recommendations for legislation or administrative action to increase the use of electronic health records by small health care providers that include the use of both public and private funding sources.

There is established within the Health Choices Administration and under the direction of the Commissioner a Health Insurance Exchange in order to facilitate access of individuals and employers, through a transparent process, to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option.

(b)

Outline of duties of Commissioner

In accordance with this subtitle and in coordination with appropriate Federal and State officials as provided under section 243(b), the Commissioner shall—

(1)

under section 304 establish standards for, accept bids from, and negotiate and enter into contracts with, QHBP offering entities for the offering of health benefits plans through the Health Insurance Exchange, with different levels of benefits required under section 303, and including with respect to oversight and enforcement;

(2)

under section 305 facilitate outreach and enrollment in such plans of Exchange-eligible individuals and employers described in section 302; and

(3)

conduct such activities related to the Health Insurance Exchange as required, including establishment of a risk pooling mechanism under section 306 and consumer protections under subtitle D of title II.

302.

Exchange-eligible individuals and employers

(a)

Access to coverage

In accordance with this section, all individuals are eligible to obtain coverage through enrollment in an Exchange-participating health benefits plan offered through the Health Insurance Exchange unless such individuals are enrolled in another qualified health benefits plan or other acceptable coverage.

(b)

Definitions

In this division:

(1)

Exchange-eligible individual

The term Exchange-eligible individual means an individual who is eligible under this section to be enrolled through the Health Insurance Exchange in an Exchange-participating health benefits plan and, with respect to family coverage, includes dependents of such individual.

(2)

Exchange-eligible employer

The term Exchange-eligible employer means an employer that is eligible under this section to enroll through the Health Insurance Exchange employees of the employer (and their dependents) in Exchange-eligible health benefits plans.

(3)

Employment-related definitions

The terms employer, employee, full-time employee, and part-time employee have the meanings given such terms by the Commissioner for purposes of this division.

(c)

Transition

Individuals and employers shall only be eligible to enroll or participate in the Health Insurance Exchange in accordance with the following transition schedule:

(1)

First year

In Y1 (as defined in section 100(c))—

(A)

individuals described in subsection (d)(1), including individuals described in subsection (d)(3); and

(B)

smallest employers described in subsection (e)(1).

(2)

Second year

In Y2—

(A)

individuals and employers described in paragraph (1); and

(B)

smaller employers described in subsection (e)(2).

(3)

Third and subsequent years

In Y3—

(A)

individuals and employers described in paragraph (2);

(B)

small employers described in subsection (e)(3); and

(C)

larger employers as permitted by the Commissioner under subsection (e)(4).

(d)

Individuals

(1)

Individual described

Subject to the succeeding provisions of this subsection, an individual described in this paragraph is an individual who—

(A)

is not enrolled in coverage described in subparagraph (C) or (D) of paragraph (2); and

(B)

is not enrolled in coverage as a full-time employee (or as a dependent of such an employee) under a group health plan if the coverage and an employer contribution under the plan meet the requirements of section 412.

For purposes of subparagraph (B), in the case of an individual who is self-employed, who has at least 1 employee, and who meets the requirements of section 412, such individual shall be deemed a full-time employee described in such subparagraph.(2)

Acceptable coverage

For purposes of this division, the term acceptable coverage means any of the following:

(A)

Qualified health benefits plan coverage

Coverage under a qualified health benefits plan.

(B)

Grandfathered health insurance coverage; coverage under current group health plan

Coverage under a grandfathered health insurance coverage (as defined in subsection (a) of section 202) or under a current group health plan (described in subsection (b) of such section).

(C)

Medicare

Coverage under part A of title XVIII of the Social Security Act.

(D)

Medicaid

Coverage for medical assistance under title XIX of the Social Security Act, excluding such coverage that is only available because of the application of subsection (u), (z), or (aa) of section 1902 of such Act.

(E)

Members of the Armed Forces and dependents (including TRICARE)

Coverage under chapter 55 of title 10, United States Code, including similar coverage furnished under section 1781 of title 38 of such Code.

(F)

VA

Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code.

(G)

Other coverage

Such other health benefits coverage, such as a State health benefits risk pool, as the Commissioner, in coordination with the Secretary of the Treasury, recognizes for purposes of this paragraph.

The Commissioner shall make determinations under this paragraph in coordination with the Secretary of the Treasury.(3)

Continuing eligibility permitted

(A)

In general

Except as provided in subparagraph (B), once an individual qualifies as an Exchange-eligible individual under this subsection (including as an employee or dependent of an employee of an Exchange-eligible employer) and enrolls under an Exchange-participating health benefits plan through the Health Insurance Exchange, the individual shall continue to be treated as an Exchange-eligible individual until the individual is no longer enrolled with an Exchange-participating health benefits plan.

(B)

Exceptions

(i)

In general

Subparagraph (A) shall not apply to an individual once the individual becomes eligible for coverage—

(I)

under part A of the Medicare program;

(II)

under the Medicaid program as a Medicaid-eligible individual, except as permitted under clause (ii); or

(III)

in such other circumstances as the Commissioner may provide.

(ii)

Transition period

In the case described in clause (i)(II), the Commissioner shall permit the individual to continue treatment under subparagraph (A) until such limited time as the Commissioner determines it is administratively feasible, consistent with minimizing disruption in the individual’s access to health care.

(4)

Transition for CHIP eligibles

An individual who is eligible for child health assistance under title XXI of the Social Security Act for a period during Y1 shall not be an Exchange-eligible individual during such period.

(e)

Employers

(1)

Smallest employer

Subject to paragraph (5), smallest employers described in this paragraph are employers with 25 or fewer employees.

(2)

Smaller employers

Subject to paragraph (5), smaller employers described in this paragraph are employers that are not smallest employers described in paragraph (1) and have 50 or fewer employees.

(3)

Small employers

Subject to paragraph (5), small employers described in this paragraph are employers that are not described in paragraph (1) or (2) and have 100 or fewer employees.

(4)

Larger employers

(A)

In general

Beginning with Y3, the Commissioner may permit employers not described in paragraph (1), (2), or (3) to be Exchange-eligible employers.

(B)

Phase-in

In applying subparagraph (A), the Commissioner may phase-in the application of such subparagraph based on the number of full-time employees of an employer and such other considerations as the Commissioner deems appropriate.

(5)

Continuing eligibility

Once an employer is permitted to be an Exchange-eligible employer under this subsection and enrolls employees through the Health Insurance Exchange, the employer shall continue to be treated as an Exchange-eligible employer for each subsequent plan year regardless of the number of employees involved unless and until the employer meets the requirement of section 411(a) through paragraph (1) of such section by offering a group health plan and not through offering an Exchange-participating health benefits plan.

(6)

Employer participation and contributions

(A)

Satisfaction of employer responsibility

For any year in which an employer is an Exchange-eligible employer, such employer may meet the requirements of section 412 with respect to employees of such employer by offering such employees the option of enrolling with Exchange-participating health benefits plans through the Health Insurance Exchange consistent with the provisions of subtitle B of title IV.

(B)

Employee choice

Any employee offered Exchange-participating health benefits plans by the employer of such employee under subparagraph (A) may choose coverage under any such plan. That choice includes, with respect to family coverage, coverage of the dependents of such employee.

(7)

Affiliated groups

Any employer which is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated, for purposes of this subtitle, as a single employer.

(8)

Treatment of multi-employer plans

The plan sponsor of a group health plan (as defined in section 773(a) of the Employee Retirement Income Security Act of 1974) that is a multi-employer plan (as defined in section 3(37) of such Act) may obtain health insurance coverage with respect to participants in the plan through the Exchange to the same extent that an employer not described in paragraph (1) or (2) is permitted by the Commissioner to obtain health insurance coverage through the Exchange as an Exchange-eligible employer.

(9)

Other counting rules

The Commissioner shall establish rules relating to how employees are counted for purposes of carrying out this subsection.

(f)

Special situation authority

The Commissioner shall have the authority to establish such rules as may be necessary to deal with special situations with regard to uninsured individuals and employers participating as Exchange-eligible individuals and employers, such as transition periods for individuals and employers who gain, or lose, Exchange-eligible participation status, and to establish grace periods for premium payment.

(g)

Surveys of individuals and employers

The Commissioner shall provide for periodic surveys of Exchange-eligible individuals and employers concerning satisfaction of such individuals and employers with the Health Insurance Exchange and Exchange-participating health benefits plans.

(h)

Exchange access study

(1)

In general

The Commissioner shall conduct a study of access to the Health Insurance Exchange for individuals and for employers, including individuals and employers who are not eligible and enrolled in Exchange-participating health benefits plans. The goal of the study is to determine if there are significant groups and types of individuals and employers who are not Exchange-eligible individuals or employers, but who would have improved benefits and affordability if made eligible for coverage in the Exchange.

(2)

Items included in study

Such study also shall examine—

(A)

the terms, conditions, and affordability of group health coverage offered by employers and QHBP offering entities outside of the Exchange compared to Exchange-participating health benefits plans; and

(B)

the affordability-test standard for access of certain employed individuals to coverage in the Health Insurance Exchange.

(3)

Report

Not later than January 1 of Y3, in Y6, and thereafter, the Commissioner shall submit to Congress a report on the study conducted under this subsection and shall include in such report recommendations regarding changes in standards for Exchange eligibility for individuals and employers.

303.

Benefits package levels

(a)

In general

The Commissioner shall specify the benefits to be made available under Exchange-participating health benefits plans during each plan year, consistent with subtitle C of title II and this section.

(b)

Limitation on health benefits plans offered by offering entities

The Commissioner may not enter into a contract with a QHBP offering entity under section 304(c) for the offering of an Exchange-participating health benefits plan in a service area unless the following requirements are met:

(1)

Required offering of basic plan

The entity offers only one basic plan for such service area.

(2)

Optional offering of enhanced plan

If and only if the entity offers a basic plan for such service area, the entity may offer one enhanced plan for such area.

(3)

Optional offering of premium plan

If and only if the entity offers an enhanced plan for such service area, the entity may offer one premium plan for such area.

(4)

Optional offering of premium-plus plans

If and only if the entity offers a premium plan for such service area, the entity may offer one or more premium-plus plans for such area.

All such plans may be offered under a single contract with the Commissioner.(c)

Specification of benefit levels for plans

(1)

In general

The Commissioner shall establish the following standards consistent with this subsection and title II:

Standards for additional benefits that may be offered, consistent with this subsection and subtitle C of title II, under a premium plan (such a plan with additional benefits referred to in this division as a premium-plus plan) .

(2)

Basic plan

(A)

In general

A basic plan shall offer the essential benefits package required under title II for a qualified health benefits plan with an actuarial value of 70 percent of the full actuarial value of the benefits provided under the reference benefits package.

(B)

Tiered cost-sharing for affordable credit eligible individuals

In the case of an affordable credit eligible individual (as defined in section 342(a)(1)) enrolled in an Exchange-participating health benefits plan, the benefits under a basic plan are modified to provide for the reduced cost-sharing for the income tier applicable to the individual under section 324(c).

(3)

Enhanced plan

An enhanced plan shall offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing as provided under title II consistent with section 223(b)(5)(A).

(4)

Premium plan

A premium plan shall offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing as provided under title II consistent with section 223(b)(5)(B).

(5)

Premium-plus plan

A premium-plus plan is a premium plan that also provides additional benefits, such as adult oral health and vision care, approved by the Commissioner. The portion of the premium that is attributable to such additional benefits shall be separately specified.

(6)

Range of permissible variation in cost-sharing

The Commissioner shall establish a permissible range of variation of cost-sharing for each basic, enhanced, and premium plan, except with respect to any benefit for which there is no cost-sharing permitted under the essential benefits package. Such variation shall permit a variation of not more than plus (or minus) 10 percent in cost-sharing with respect to each benefit category specified under section 222. Nothing in this subtitle shall be construed as prohibiting tiering in cost-sharing, including through preferred and participating providers and prescription drugs. In applying this paragraph, a health benefits plan may increase the cost-sharing by 10 percent within each category or tier, as applicable, and may decrease or eliminate cost-sharing in any category or tier as compared to the essential benefits package.

(d)

Treatment of State benefit mandates

Insofar as a State requires a health insurance issuer offering health insurance coverage to include benefits beyond the essential benefits package, such requirement shall continue to apply to an Exchange-participating health benefits plan, if the State has entered into an arrangement satisfactory to the Commissioner to reimburse the Commissioner for the amount of any net increase in affordability premium credits under subtitle C as a result of an increase in premium in basic plans as a result of application of such requirement.

(e)

Rules regarding coverage of and affordability credits for specified services

(1)

Assured availability of varied coverage through the Health Insurance Exchange

The Commissioner shall assure that, of the Exchange participating health benefits plan offered in each premium rating area of the Health Insurance Exchange—

(A)

there is at least one such plan that provides coverage of services described in subparagraphs (A) and (B) of section 222(d)(4); and

(B)

there is at least one such plan that does not provide coverage of services described in section 222(d)(4)(A) which plan may also be one that does not provide coverage of services described in section 222(d)(4)(B).

(2)

Segregation of funds

If a qualified health benefits plan provides coverage of services described in section 222(d)(4)(A), the plan shall provide assurances satisfactory to the Commissioner that—

(A)

any affordability credits provided under subtitle C of title II are not used for purposes of paying for such services; and

(B)

only premium amounts attributable to the actuarial value described in section 213(b) are used for such purpose.

304.

Contracts for the offering of Exchange-participating health benefits plans

(a)

Contracting duties

In carrying out section 301(b)(1) and consistent with this subtitle:

(1)

Offering entity and plan standards

The Commissioner shall—

(A)

establish standards necessary to implement the requirements of this title and title II for—

(i)

QHBP offering entities for the offering of an Exchange-participating health benefits plan; and

(ii)

Exchange-participating health benefits plans; and

(B)

certify QHBP offering entities and qualified health benefits plans as meeting such standards and requirements of this title and title II for purposes of this subtitle.

(2)

Soliciting and negotiating bids; contracts

(A)

Bid solicitation

The Commissioner shall solicit bids from QHBP offering entities for the offering of Exchange-participating health benefits plans. Such bids shall include justification for proposed premiums.

(B)

Bid review and negotiation

The Commissioner shall, based upon a review of such bids including the premiums and their affordability, negotiate with such entities for the offering of such plans.

(C)

Denial of excessive premiums

The Commissioner shall deny excessive premiums and premium increases.

(D)

Contracts

The Commissioner shall enter into contracts with such entities for the offering of such plans through the Health Insurance Exchange under terms (consistent with this title) negotiated between the Commissioner and such entities.

(3)

Federal Acquisition Regulation

In carrying out this subtitle, the Commissioner may waive such provisions of the Federal Acquisition Regulation that the Commissioner determines to be inconsistent with the furtherance of this subtitle, other than provisions relating to confidentiality of information. Competitive procedures shall be used in awarding contracts under this subtitle to the extent that such procedures are consistent with this subtitle.

The standards established under subsection (a)(1)(A) shall require that, in order for a QHBP offering entity to offer an Exchange-participating health benefits plan, the entity must meet the following requirements:

(1)

Licensed

The entity shall be licensed to offer health insurance coverage under State law for each State in which it is offering such coverage.

(2)

Data reporting

The entity shall provide for the reporting of such information as the Commissioner may specify, including information necessary to administer the risk pooling mechanism described in section 306(b) and information to address disparities in health and health care.

(3)

Affordability

The entity shall provide for affordable premiums.

(4)

Implementing affordability credits

The entity shall provide for implementation of the affordability credits provided for enrollees under subtitle C, including the reduction in cost-sharing under section 344(c).

(5)

Enrollment

The entity shall accept all enrollments under this subtitle, subject to such exceptions (such as capacity limitations) in accordance with the requirements under title II for a qualified health benefits plan. The entity shall notify the Commissioner if the entity projects or anticipates reaching such a capacity limitation that would result in a limitation in enrollment.

(6)

Risk pooling participation

The entity shall participate in such risk pooling mechanism as the Commissioner establishes under section 306(b).

(7)

Essential community providers

With respect to the basic plan offered by the entity, the entity shall include within the plan network those essential community providers, where available, that serve predominantly low-income, medically-underserved individuals, such as health care providers defined in section 340B(a)(4) of the Public Health Service Act and providers described in section 1927(c)(1)(D)(i)(IV) of the Social Security Act (as amended by section 221 of Public Law 111–8). The Commissioner shall specify the extent to which and manner in which the previous sentence shall apply in the case of a basic plan with respect to which the Commissioner determines provides substantially all benefits through a health maintenance organization, as defined in section 2791(b)(3) of the Public Health Service Act. This paragraph shall not be construed to require a basic plan to contract with a provider if such provider refuses to accept the generally applicable payment rates of such plan.

(8)

Culturally and linguistically appropriate services and communications

The entity shall provide for culturally and linguistically appropriate communication and health services.

(9)

Special rules with respect to Indian enrollees and Indian health care providers

(A)

Choice of providers

The entity shall—

(i)

demonstrate to the satisfaction of the Commissioner that it has contracted with a sufficient number of Indian health care providers to ensure timely access to covered services furnished by such providers to individual Indians through the entity’s Exchange-participating health benefits plan; and

(ii)

agree to pay Indian health care providers, whether such providers are participating or nonparticipating providers with respect to the entity, for covered services provided to those enrollees who are eligible to receive services from such providers at a rate that is not less than the level and amount of payment which the entity would make for the services of a participating provider which is not an Indian health care provider.

(B)

Special rule relating to Indian health care providers

Provision of services by an Indian health care provider exclusively to Indians and their dependents shall not constitute discrimination under this Act.

(10)

Program integrity standards

The entity shall establish and operate a program to protect and promote the integrity of Exchange-participating health benefits plans it offers, in accordance with standards and functions established by the Commissioner.

(11)

Additional requirements

The entity shall comply with other applicable requirements of this title, as specified by the Commissioner, which shall include standards regarding billing and collection practices for premiums and related grace periods and which may include standards to ensure that the entity does not use coercive practices to force providers not to contract with other entities offering coverage through the Health Insurance Exchange.

(c)

Contracts

(1)

Bid application

To be eligible to enter into a contract under this section, a QHBP offering entity shall submit to the Commissioner a bid at such time, in such manner, and containing such information as the Commissioner may require.

(2)

Term

Each contract with a QHBP offering entity under this section shall be for a term of not less than one year, but may be made automatically renewable from term to term in the absence of notice of termination by either party.

(3)

Enforcement of network adequacy

In the case of a health benefits plan of a QHBP offering entity that uses a provider network, the contract under this section with the entity shall provide that if—

(A)

the Commissioner determines that such provider network does not meet such standards as the Commissioner shall establish under section 215; and

(B)

an individual enrolled in such plan receives an item or service from a provider that is not within such network;

then any cost-sharing for such item or service shall be equal to the amount of such cost-sharing that would be imposed if such item or service was furnished by a provider within such network.(4)

Oversight and enforcement responsibilities

The Commissioner shall establish processes, in coordination with State insurance regulators, to oversee, monitor, and enforce applicable requirements of this title with respect to QHBP offering entities offering Exchange-participating health benefits plans, including the marketing of such plans. Such processes shall include the following:

(A)

Grievance and complaint mechanisms

The Commissioner shall establish, in coordination with State insurance regulators, a process under which Exchange-eligible individuals and employers may file complaints concerning violations of such standards.

(B)

Enforcement

In carrying out authorities under this division relating to the Health Insurance Exchange, the Commissioner may impose one or more of the intermediate sanctions described in section 242(d).

(C)

Termination

(i)

In general

The Commissioner may terminate a contract with a QHBP offering entity under this section for the offering of an Exchange-participating health benefits plan if such entity fails to comply with the applicable requirements of this title. Any determination by the Commissioner to terminate a contract shall be made in accordance with formal investigation and compliance procedures established by the Commissioner under which—

(I)

the Commissioner provides the entity with the reasonable opportunity to develop and implement a corrective action plan to correct the deficiencies that were the basis of the Commissioner’s determination; and

(II)

the Commissioner provides the entity with reasonable notice and opportunity for hearing (including the right to appeal an initial decision) before terminating the contract.

(ii)

Exception for imminent and serious risk to health

Clause (i) shall not apply if the Commissioner determines that a delay in termination, resulting from compliance with the procedures specified in such clause prior to termination, would pose an imminent and serious risk to the health of individuals enrolled under the qualified health benefits plan of the QHBP offering entity.

(D)

Construction

Nothing in this subsection shall be construed as preventing the application of other sanctions under subtitle E of title II with respect to an entity for a violation of such a requirement.

(5)

Special rule related to cost-sharing and Indian health care providers

The contract under this section with a QHBP offering entity for a health benefits plan shall provide that if an individual who is an Indian is enrolled in such a plan and such individual receives a covered item or service from an Indian health care provider (regardless of whether such provider is in the plan’s provider network), the cost-sharing for such item or service shall be equal to the amount of cost-sharing that would be imposed if such item or service—

(A)

had been furnished by another provider in the plan’s provider network; or

(B)

in the case that the plan has no such network, was furnished by a non-Indian provider.

(6)

National plan

Nothing in this section shall be construed as preventing the Commissioner from entering into a contract under this subsection with a QHBP offering entity for the offering of a health benefits plan with the same benefits in every State so long as such entity is licensed to offer such plan in each State and the benefits meet the applicable requirements in each such State.

(d)

No discrimination on the basis of provision of abortion

No Exchange participating health benefits plan may discriminate against any individual health care provider or health care facility because of its willingness or unwillingness to provide, pay for, provide coverage of, or refer for abortions.

305.

Outreach and enrollment of Exchange-eligible individuals and employers in Exchange-participating health benefits plan

(a)

In general

(1)

Outreach

The Commissioner shall conduct outreach activities consistent with subsection (c), including through use of appropriate entities as described in paragraph (3) of such subsection, to inform and educate individuals and employers about the Health Insurance Exchange and Exchange-participating health benefits plan options. Such outreach shall include outreach specific to vulnerable populations, such as children, individuals with disabilities, individuals with mental illness, and individuals with other cognitive impairments.

(2)

Eligibility

The Commissioner shall make timely determinations of whether individuals and employers are Exchange-eligible individuals and employers (as defined in section 302).

(3)

Enrollment

The Commissioner shall establish and carry out an enrollment process for Exchange-eligible individuals and employers, including at community locations, in accordance with subsection (b).

(b)

Enrollment process

(1)

In general

The Commissioner shall establish a process consistent with this title for enrollments in Exchange-participating health benefits plans. Such process shall provide for enrollment through means such as the mail, by telephone, electronically, and in person.

(2)

Enrollment periods

(A)

Open enrollment period

The Commissioner shall establish an annual open enrollment period during which an Exchange-eligible individual or employer may elect to enroll in an Exchange-participating health benefits plan for the following plan year and an enrollment period for affordability credits under subtitle C. Such periods shall be during September through November of each year, or such other time that would maximize timeliness of income verification for purposes of such subtitle. The open enrollment period shall not be less than 30 days.

(B)

Special enrollment

The Commissioner shall also provide for special enrollment periods to take into account special circumstances of individuals and employers, such as an individual who—

(i)

loses acceptable coverage;

(ii)

experiences a change in marital or other dependent status;

(iii)

moves outside the service area of the Exchange-participating health benefits plan in which the individual is enrolled; or

(iv)

experiences a significant change in income.

(C)

Enrollment Information

The Commissioner shall provide for the broad dissemination of information to prospective enrollees on the enrollment process, including before each open enrollment period. In carrying out the previous sentence, the Commissioner may work with other appropriate entities to facilitate such provision of information.

(3)

Automatic enrollment for non-Medicaid eligible individuals

(A)

In general

The Commissioner shall provide for a process under which individuals who are Exchange-eligible individuals described in subparagraph (B) are automatically enrolled under an appropriate Exchange-participating health benefits plan. Such process may involve a random assignment or some other form of assignment that takes into account the health care providers used by the individual involved or such other relevant factors as the Commissioner may specify.

(B)

Subsidized individuals described

An individual described in this subparagraph is an Exchange-eligible individual who is either of the following:

(i)

Affordability credit eligible individuals

The individual—

(I)

has applied for, and been determined eligible for, affordability credits under subtitle C;

(II)

has not opted out from receiving such affordability credit; and

(III)

does not otherwise enroll in another Exchange-participating health benefits plan.

(ii)

Individuals enrolled in a terminated plan

The individual who is enrolled in an Exchange-participating health benefits plan that is terminated (during or at the end of a plan year) and who does not otherwise enroll in another Exchange-participating health benefits plan.

(4)

Direct payment of premiums to plans

Under the enrollment process, individuals enrolled in an Exchange-participating health benefits plan shall pay such plans directly, and not through the Commissioner or the Health Insurance Exchange.

(c)

Coverage information and assistance

(1)

Coverage information

The Commissioner shall provide for the broad dissemination of information on Exchange-participating health benefits plans offered under this title. Such information shall be provided in a comparative manner, and shall include information on benefits, premiums, cost-sharing, quality, provider networks, and consumer satisfaction.

(2)

Consumer assistance with choice

To provide assistance to Exchange-eligible individuals and employers, the Commissioner shall—

(A)

provide for the operation of a toll-free telephone hotline to respond to requests for assistance and maintain an Internet Web site through which individuals may obtain information on coverage under Exchange-participating health benefits plans and file complaints;

(B)

develop and disseminate information to Exchange-eligible enrollees on their rights and responsibilities;

(C)

assist Exchange-eligible individuals in selecting Exchange-participating health benefits plans and obtaining benefits through such plans; and

(D)

ensure that the Internet Web site described in subparagraph (A) and the information described in subparagraph (B) is developed using plain language (as defined in section 233(a)(2)).

(3)

Use of other entities

In carrying out this subsection, the Commissioner may work with other appropriate entities to facilitate the dissemination of information under this subsection and to provide assistance as described in paragraph (2).

(d)

Coverage for certain newborns under Medicaid

(1)

In general

In the case of a child born in the United States who at the time of birth is not otherwise covered under acceptable coverage, for the period of time beginning on the date of birth and ending on the date the child otherwise is covered under acceptable coverage (or, if earlier, the end of the month in which the 60-day period, beginning on the date of birth, ends), the child shall be deemed—

(A)

to be a Medicaid eligible individual for purposes of this division and Medicaid; and

(B)

to be automatically enrolled in Medicaid as a traditional Medicaid eligible individual (as defined in section 1943(c) of the Social Security Act).

(2)

Extended treatment as Medicaid eligible individual

In the case of a child described in paragraph (1) who at the end of the period referred to in such paragraph is not otherwise covered under acceptable coverage, the child shall be deemed (until such time as the child obtains such coverage or the State otherwise makes a determination of the child’s eligibility for medical assistance under its Medicaid plan pursuant to section 1943(b)(1) of the Social Security Act) to be a Medicaid eligible individual described in section 1902(l)(1)(B) of such Act.

(e)

Medicaid coverage for Medicaid eligible individuals

(1)

Medicaid enrollment obligation

An individual may apply, in the manner described in section 341(b)(1), for a determination of whether the individual is a Medicaid-eligible individual. If the individual is determined to be so eligible, the Commissioner, through the Medicaid memorandum of understanding under paragraph (2), shall provide for the enrollment of the individual under the State Medicaid plan in accordance with such memorandum of understanding. In the case of such an enrollment, the State shall provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid agency.

(2)

Coordinated enrollment with State through memorandum of understanding

The Commissioner, in consultation with the Secretary of Health and Human Services, shall enter into a memorandum of understanding with each State with respect to coordinating enrollment of individuals in Exchange-participating health benefits plans and under the State’s Medicaid program consistent with this section and to otherwise coordinate the implementation of the provisions of this division with respect to the Medicaid program. Such memorandum shall permit the exchange of information consistent with the limitations described in section 1902(a)(7) of the Social Security Act. Nothing in this section shall be construed as permitting such memorandum to modify or vitiate any requirement of a State Medicaid plan.

(f)

Effective culturally and linguistically appropriate communication

In carrying out this section, the Commissioner shall establish effective methods for communicating in plain language and a culturally and linguistically appropriate manner.

(g)

Role for enrollment agents and brokers

Nothing in this division shall be construed to affect the role of enrollment agents and brokers under State law, including with regard to the enrollment of individuals and employers in qualified health benefits plans including the public health insurance option.

(h)

Assistance for small employers

(1)

In general

The Commissioner, in consultation with the Small Business Administration, shall establish and carry out a program to provide to small employers counseling and technical assistance with respect to the provision of health insurance to employees of such employers through the Health Insurance Exchange.

(2)

Duties

The program established under paragraph (1) shall include the following services:

(A)

Educational activities to increase awareness of the Health Insurance Exchange and available small employer health plan options.

(B)

Distribution of information to small employers with respect to the enrollment and selection process for health plans available under the Health Insurance Exchange, including standardized comparative information on the health plans available under the Health Insurance Exchange.

(C)

Distribution of information to small employers with respect to available affordability credits or other financial assistance.

(D)

Referrals to appropriate entities of complaints and questions relating to the Health Insurance Exchange.

(E)

Enrollment and plan selection assistance for employers with respect to the Health Insurance Exchange.

(F)

Responses to questions relating to the Health Insurance Exchange and the program established under paragraph (1).

(3)

Authority to provide services directly or by contract

The Commissioner may provide services under paragraph (2) directly or by contract with nonprofit entities that the Commissioner determines capable of carrying out such services.

(4)

Small employer defined

In this subsection, the term small employer means an employer with less than 100 employees.

(i)

Participation of small employer benefit arrangements

(1)

In general

The Commissioner may enter into contracts with small employer benefit arrangements to provide consumer information, outreach, and assistance in the enrollment of small employers (and their employees) who are members of such an arrangement under Exchange participating health benefits plans.

(2)

Small employer benefit arrangement defined

In this subsection, the term small employer benefit arrangement means a not-for-profit agricultural or other cooperative that—

(A)

consists solely of its members and is operated for the primary purpose of providing affordable employee benefits to its members;

(B)

only has as members small employers in the same industry or line of business;

(C)

has no member that has more than a 5 percent voting interest in the cooperative; and

The Commissioner shall establish a mechanism whereby there is an adjustment made of the premium amounts payable among QHBP offering entities offering Exchange-participating health benefits plans of premiums collected for such plans that takes into account (in a manner specified by the Commissioner) the differences in the risk characteristics of individuals and employees enrolled under the different Exchange-participating health benefits plans offered by such entities so as to minimize the impact of adverse selection of enrollees among the plans offered by such entities. For purposes of the previous sentence, the Commissioner may utilize data regarding enrollee demographics, inpatient and outpatient diagnoses (in a similar manner as such data are used under parts C and D of title XVIII of the Social Security Act), and such other information as the Secretary determines may be necessary, such as the actual medical costs of enrollees during the previous year.

307.

Health Insurance Exchange Trust Fund

(a)

Establishment of Health Insurance Exchange Trust Fund

There is created within the Treasury of the United States a trust fund to be known as the Health Insurance Exchange Trust Fund (in this section referred to as the Trust Fund), consisting of such amounts as may be appropriated or credited to the Trust Fund under this section or any other provision of law.

(b)

Payments from Trust Fund

The Commissioner shall pay from time to time from the Trust Fund such amounts as the Commissioner determines are necessary to make payments to operate the Health Insurance Exchange, including payments under subtitle C (relating to affordability credits).

(c)

Transfers to Trust Fund

(1)

Dedicated payments

There are hereby appropriated to the Trust Fund amounts equivalent to the following:

(A)

Taxes on individuals not obtaining acceptable coverage

The amounts received in the Treasury under section 59B of the Internal Revenue Code of 1986 (relating to requirement of health insurance coverage for individuals).

(B)

Employment taxes on employers not providing acceptable coverage

The amounts received in the Treasury under sections 3111(c) and 3221(c) of the Internal Revenue Code of 1986 (relating to employers electing to not provide health benefits).

(C)

Excise tax on failures to meet certain health coverage requirements

The amounts received in the Treasury under section 4980H(b) (relating to excise tax with respect to failure to meet health coverage participation requirements).

(2)

Appropriations to cover government contributions

There are hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, to the Trust Fund, an amount equivalent to the amount of payments made from the Trust Fund under subsection (b) plus such amounts as are necessary reduced by the amounts deposited under paragraph (1).

(d)

Application of certain rules

Rules similar to the rules of subchapter B of chapter 98 of the Internal Revenue Code of 1986 shall apply with respect to the Trust Fund.

308.

Optional operation of State-based health insurance exchanges

(a)

In general

If—

(1)

a State (or group of States, subject to the approval of the Commissioner) applies to the Commissioner for approval of a State-based Health Insurance Exchange to operate in the State (or group of States); and

(2)

the Commissioner approves such State-based Health Insurance Exchange,

then, subject to subsections (c) and (d), the State-based Health Insurance Exchange shall operate, instead of the Health Insurance Exchange, with respect to such State (or group of States). The Commissioner shall approve a State-based Health Insurance Exchange if it meets the requirements for approval under subsection (b).(b)

Requirements for approval

(1)

In general

The Commissioner may not approve a State-based Health Insurance Exchange under this section unless the following requirements are met:

(A)

The State-based Health Insurance Exchange must demonstrate the capacity to and provide assurances satisfactory to the Commissioner that the State-based Health Insurance Exchange will carry out the functions specified for the Health Insurance Exchange in the State (or States) involved, including—

(i)

negotiating and contracting with QHBP offering entities for the offering of Exchange-participating health benefits plans, which satisfy the standards and requirements of this title and title II;

(ii)

enrolling Exchange-eligible individuals and employers in such State in such plans;

(iii)

the establishment of sufficient local offices to meet the needs of Exchange-eligible individuals and employers;

(iv)

administering affordability credits under subtitle B using the same methodologies (and at least the same income verification methods) as would otherwise apply under such subtitle and at a cost to the Federal Government which does exceed the cost to the Federal Government if this section did not apply; and

(v)

enforcement activities consistent with Federal requirements.

(B)

There is no more than one Health Insurance Exchange operating with respect to any one State.

(C)

The State provides assurances satisfactory to the Commissioner that approval of such an Exchange will not result in any net increase in expenditures to the Federal Government.

(D)

The State provides for reporting of such information as the Commissioner determines and assurances satisfactory to the Commissioner that it will vigorously enforce violations of applicable requirements.

(E)

Such other requirements as the Commissioner may specify.

(2)

Presumption for certain State-operated Exchanges

(A)

In general

In the case of a State operating an Exchange prior to January 1, 2010, that seeks to operate the State-based Health Insurance Exchange under this section, the Commissioner shall presume that such Exchange meets the standards under this section unless the Commissioner determines, after completion of the process established under subparagraph (B), that the Exchange does not comply with such standards.

(B)

Process

The Commissioner shall establish a process to work with a State described in subparagraph (A) to provide assistance necessary to assure that the State’s Exchange comes into compliance with the standards for approval under this section.

(c)

Ceasing operation

(1)

In general

A State-based Health Insurance Exchange may, at the option of each State involved, and only after providing timely and reasonable notice to the Commissioner, cease operation as such an Exchange, in which case the Health Insurance Exchange shall operate, instead of such State-based Health Insurance Exchange, with respect to such State (or States).

(2)

Termination; Health Insurance Exchange resumption of functions

The Commissioner may terminate the approval (for some or all functions) of a State-based Health Insurance Exchange under this section if the Commissioner determines that such Exchange no longer meets the requirements of subsection (b) or is no longer capable of carrying out such functions in accordance with the requirements of this subtitle. In lieu of terminating such approval, the Commissioner may temporarily assume some or all functions of the State-based Health Insurance Exchange until such time as the Commissioner determines the State-based Health Insurance Exchange meets such requirements of subsection (b) and is capable of carrying out such functions in accordance with the requirements of this subtitle.

(3)

Effectiveness

The ceasing or termination of a State-based Health Insurance Exchange under this subsection shall be effective in such time and manner as the Commissioner shall specify.

(d)

Retention of authority

(1)

Authority retained

Enforcement authorities of the Commissioner shall be retained by the Commissioner.

(2)

Discretion to retain additional authority

The Commissioner may specify functions of the Health Insurance Exchange that—

(A)

may not be performed by a State-based Health Insurance Exchange under this section; or

(B)

may be performed by the Commissioner and by such a State-based Health Insurance Exchange.

(e)

References

In the case of a State-based Health Insurance Exchange, except as the Commissioner may otherwise specify under subsection (d), any references in this subtitle to the Health Insurance Exchange or to the Commissioner in the area in which the State-based Health Insurance Exchange operates shall be deemed a reference to the State-based Health Insurance Exchange and the head of such Exchange, respectively.

(f)

Funding

In the case of a State-based Health Insurance Exchange, there shall be assistance provided for the operation of such Exchange in the form of a matching grant with a State share of expenditures required.

309.

Interstate health insurance compacts

(a)

In general

Effective January 1, 2015, 2 or more States may form Health Care Choice Compacts (in this section referred to as compacts) to facilitate the purchase of individual health insurance coverage across State lines.

(b)

Model guidelines

The Secretary of Health and Human Services (in this section referred to as the Secretary) shall request the National Association of Insurance Commissioners (in this section referred to as NAIC) to develop model guidelines for the creation of compacts. In developing such guidelines, the NAIC shall consult with consumers, health insurance issuers, the Secretary, and other interested parties. Such guidelines shall—

(1)

provide for the sale of health insurance coverage to residents of all compacting States subject to the laws and regulations of a primary State designated by the health insurance issuer;

(2)

require health insurance issuers issuing health insurance coverage in secondary States to maintain licensure in every such State;

(3)

preserve the authority of the State of an individual’s residence to address—

(A)

market conduct;

(B)

unfair trade practices;

(C)

network adequacy;

(D)

consumer protection standards;

(E)

grievance and appeals;

(F)

fair claims payment requirements; and

(G)

prompt payment of claims;

(4)

permit State insurance commissioners and other State agencies in secondary States access to the records of a health insurance issuer to the same extent as if the policy were written in that State; and

(5)

provide for clear and conspicuous disclosure to consumers that the policy may not be subject to all the laws and regulations of the State in which the purchaser resides.

(c)

Required consideration

If model guidelines developed under subsection (b) are submitted to the Secretary by January 1, 2013, the Secretary shall issue them as regulations. If the NAIC fails to submit such model guidelines by such date, the Secretary shall, no later than October 1, 2013, develop and promulgate the regulations implementing model guidelines described in subsection (b).

(d)

No requirement to compact

Nothing in this section shall be construed to require a State to join a compact.

(e)

State authority

A State may not enter into a compact under this subsection unless the State enacts a law after the date of enactment of this Act that specifically authorizes the State to enter into such compact.

(f)

Consumer protections

If a State enters into a compact it must retain responsibility for the consumer protections of its residents and its residents retain the right to bring a claim in a State court in the State in which the resident resides.

(g)

Assistance to compacting states

(1)

In general

Beginning January 1, 2015, the Secretary shall make awards, from amounts appropriated under paragraph (5), to States in the amount specified in paragraph (2) for the uses described in paragraph (3).

(2)

Amount specified

(A)

In general

For each fiscal year, the Secretary shall determine the total amount that the Secretary will make available for grants under this subsection.

(B)

State amount

For each State that is awarded a grant under paragraph (1), the amount of such grants shall be based on a formula established by the Secretary, not to exceed $1 million per State, under which States shall receive an award in the amount that is based on the following two components:

(i)

A minimum amount for each State.

(ii)

An additional amount based on population of the State.

(3)

Use of funds

A State shall use amounts awarded under this subsection for activities (including planning activities) related regulating health insurance coverage sold in secondary States.

(4)

Renewability of grant

The Secretary may renew a grant award under paragraph (1) if the State receiving the grant continues to be a member of a compact.

(5)

Authorization of appropriations

There are authorized to be appropriated such sums as may be necessary to carry out this subsection in each of fiscal years 2015 through 2020.

310.

Health insurance cooperatives

(a)

Establishment

Not later than 6 months after the date of the enactment of this Act, the Commissioner, in consultation with the Secretary of the Treasury, shall establish a Consumer Operated and Oriented Plan program (in this section referred to as the CO–OP program) under which the Commissioner may make grants and loans for the establishment and initial operation of not-for-profit, member–run health insurance cooperatives (in this section individually referred to as a cooperative) that provide insurance through the Health Insurance Exchange or a State-based Health Insurance Exchange under section 308. Nothing in this section shall be construed as requiring a State to establish such a cooperative.

(b)

Start-up and solvency grants and loans

(1)

In general

Not later than 36 months after the date of the enactment of this Act, the Commissioner, acting through the CO–OP program, may make—

(A)

loans (of such period and with such terms as the Secretary may specify) to cooperatives to assist such cooperatives with start-up costs; and

(B)

grants to cooperatives to assist such cooperatives in meeting State solvency requirements in the States in which such cooperative offers or issues insurance coverage.

(2)

Conditions

A grant or loan may not be awarded under this subsection with respect to a cooperative unless the following conditions are met:

(A)

The cooperative is structured as a not-for-profit, member organization under the law of each State in which such cooperative offers, intends to offer, or issues insurance coverage, with the membership of the cooperative being made up entirely of beneficiaries of the insurance coverage offered by such cooperative.

(B)

The cooperative did not offer insurance on or before July 16, 2009, and the cooperative is not an affiliate or successor to an insurance company offering insurance on or before such date.

(C)

The governing documents of the cooperative incorporate ethical and conflict of interest standards designed to protect against insurance industry involvement and interference in the governance of the cooperative.

(D)

The cooperative is not sponsored by a State government.

(E)

Substantially all of the activities of the cooperative consist of the issuance of qualified health benefits plans through the Health Insurance Exchange or a State-based health insurance exchange.

(F)

The cooperative is licensed to offer insurance in each State in which it offers insurance.

(G)

The governance of the cooperative must be subject to a majority vote of its members.

(H)

As provided in guidance issued by the Secretary of Health and Human Services, the cooperative operates with a strong consumer focus, including timeliness, responsiveness, and accountability to members.

(I)

Any profits made by the cooperative are used to lower premiums, improve benefits, or to otherwise improve the quality of health care delivered to members.

(3)

Priority

The Commissioner, in making grants and loans under this subsection, shall give priority to cooperatives that—

(A)

operate on a statewide basis;

(B)

use an integrated delivery system; or

(C)

have a significant level of financial support from nongovernmental sources.

(4)

Rules of construction

Nothing in this section shall be construed to prevent a cooperative established in one State from integrating with a cooperative established in another State the administration, issuance of coverage, or other activities related to acting as a QHBP offering entity. Nothing in this section shall be construed as preventing State governments from taking actions to permit such integration.

(5)

Amortization of grants and loans

The Secretary shall provide for the repayment of grants or loans provided under this subsection to the Treasury in an amortized manner over a 10-year period.

(6)

Repayment for violations of terms of program

If a cooperative violates the terms of the CO–OP program and fails to correct the violation within a reasonable period of time, as determined by the Commissioner, the cooperative shall repay the total amount of any loan or grant received by such cooperative under this section, plus interest (at a rate determined by the Secretary).

(7)

Authorization of appropriations

There is authorized to be appropriated $5,000,000,000 for the period of fiscal years 2010 through 2014 to provide for grants and loans under this subsection.

(c)

Definitions

For purposes of this section:

(1)

State

The term State means each of the 50 States and the District of Columbia.

(2)

Member

The term member, with respect to a cooperative, means an individual who, after the cooperative offers health insurance coverage, is enrolled in such coverage.

311.

Retention of DOD and VA authority

Nothing in this subtitle shall be construed as affecting any authority under title 38, United States Code, or chapter 55 of title 10, United States Code.

B

Public Health Insurance Option

321.

Establishment and administration of a public health insurance option as an Exchange-qualified health benefits plan

(a)

Establishment

For years beginning with Y1, the Secretary of Health and Human Services (in this subtitle referred to as the Secretary) shall provide for the offering of an Exchange-participating health benefits plan (in this division referred to as the public health insurance option) that ensures choice, competition, and stability of affordable, high quality coverage throughout the United States in accordance with this subtitle. In designing the option, the Secretary’s primary responsibility is to create a low-cost plan without compromising quality or access to care.

(b)

Offering as an Exchange-participating health benefits plan

(1)

Exclusive to the Exchange

The public health insurance option shall only be made available through the Health Insurance Exchange.

(2)

Ensuring a level playing field

Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost-sharing.

(3)

Provision of benefit levels

The public health insurance option—

(A)

shall offer basic, enhanced, and premium plans; and

(B)

may offer premium-plus plans.

(c)

Administrative contracting

The Secretary may enter into contracts for the purpose of performing administrative functions (including functions described in subsection (a)(4) of section 1874A of the Social Security Act) with respect to the public health insurance option in the same manner as the Secretary may enter into contracts under subsection (a)(1) of such section. The Secretary has the same authority with respect to the public health insurance option as the Secretary has under subsections (a)(1) and (b) of section 1874A of the Social Security Act with respect to title XVIII of such Act. Contracts under this subsection shall not involve the transfer of insurance risk to such entity.

(d)

Ombudsman

The Secretary shall establish an office of the ombudsman for the public health insurance option which shall have duties with respect to the public health insurance option similar to the duties of the Medicare Beneficiary Ombudsman under section 1808(c)(2) of the Social Security Act.

(e)

Data collection

The Secretary shall collect such data as may be required to establish premiums and payment rates for the public health insurance option and for other purposes under this subtitle, including to improve quality and to reduce racial, ethnic, and other disparities in health and health care. Nothing in this subtitle may be construed as authorizing the Secretary (or any employee or contractor) to create or maintain lists of non-medical personal property.

(f)

Treatment of public health insurance option

With respect to the public health insurance option, the Secretary shall be treated as a QHBP offering entity offering an Exchange-participating health benefits plan.

(g)

Access to Federal courts

The provisions of Medicare (and related provisions of title II of the Social Security Act) relating to access of Medicare beneficiaries to Federal courts for the enforcement of rights under Medicare, including with respect to amounts in controversy, shall apply to the public health insurance option and individuals enrolled under such option under this title in the same manner as such provisions apply to Medicare and Medicare beneficiaries.

in a manner that complies with the premium rules established by the Commissioner under section 213 for Exchange-participating health benefits plans; and

(B)

at a level sufficient to fully finance the costs of—

(i)

health benefits provided by the public health insurance option; and

(ii)

administrative costs related to operating the public health insurance option.

(2)

Contingency margin

In establishing premium rates under paragraph (1), the Secretary shall include an appropriate amount for a contingency margin (which shall be not less than 90 days of estimated claims). Before setting such appropriate amount for years starting with Y3, the Secretary shall solicit a recommendation on such amount from the American Academy of Actuaries.

(b)

Account

(1)

Establishment

There is established in the Treasury of the United States an Account for the receipts and disbursements attributable to the operation of the public health insurance option, including the start-up funding under paragraph (2). Section 1854(g) of the Social Security Act shall apply to receipts described in the previous sentence in the same manner as such section applies to payments or premiums described in such section.

(2)

Start-up funding

(A)

In general

In order to provide for the establishment of the public health insurance option, there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $2,000,000,000. In order to provide for initial claims reserves before the collection of premiums, there are hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, such sums as necessary to cover 90 days worth of claims reserves based on projected enrollment.

(B)

Amortization of start-up funding

The Secretary shall provide for the repayment of the startup funding provided under subparagraph (A) to the Treasury in an amortized manner over the 10-year period beginning with Y1.

(C)

Limitation on funding

Nothing in this section shall be construed as authorizing any additional appropriations to the Account, other than such amounts as are otherwise provided with respect to other Exchange-participating health benefits plans.

(3)

No bailouts

In no case shall the public health insurance option receive any Federal funds for purposes of insolvency in any manner similar to the manner in which entities receive Federal funding under the Troubled Assets Relief Program of the Secretary of the Treasury.

323.

Payment rates for items and services

(a)

Negotiation of payment rates

(1)

In general

The Secretary shall negotiate payment for the public health insurance option for health care providers and items and services, including prescription drugs, consistent with this section and section 324.

(2)

Manner of negotiation

The Secretary shall negotiate such rates in a manner that results in payment rates that are not lower, in the aggregate, than rates under title XVIII of the Social Security Act, and not higher, in the aggregate, than the average rates paid by other QHBP offering entities for services and health care providers.

(3)

Innovative payment methods

Nothing in this subsection shall be construed as preventing the use of innovative payment methods such as those described in section 324 in connection with the negotiation of payment rates under this subsection.

(b)

Establishment of a provider network

(1)

In general

Health care providers (including physicians and hospitals) participating in Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary consistent with this subsection.

(2)

Requirements for opt-out process

Under the process established under paragraph (1)—

(A)

providers described in such paragraph shall be provided at least a 1-year period prior to the first day of Y1 to opt out of participating in the public health insurance option;

(B)

no provider shall be subject to a penalty for not participating in the public health insurance option;

(C)

the Secretary shall include information on how providers participating in Medicare who chose to opt out of participating in the public health insurance option may opt back in; and

(D)

there shall be an annual enrollment period in which providers may decide whether to participate in the public health insurance option.

(3)

Rulemaking

Not later than 18 months before the first day of Y1, the Secretary shall promulgate rules (pursuant to notice and comment) for the process described in paragraph (1).

(c)

Limitations on review

There shall be no administrative or judicial review of a payment rate or methodology established under this section or under section 324.

324.

Modernized payment initiatives and delivery system reform

(a)

In general

For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to determine payments for items and services under the public health insurance option. The payment mechanisms and policies under this section may include patient-centered medical home and other care management payments, accountable care organizations, value-based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.

(b)

Requirements for innovative payments

The Secretary shall design and implement the payment mechanisms and policies under this section in a manner that—

promotes care that is integrated, patient-centered, quality, and efficient.

(c)

Encouraging the use of high value services

To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost-sharing and payment rates to encourage the use of services that promote health and value.

(d)

Promotion of delivery system reform

The Secretary shall monitor and evaluate the progress of payment and delivery system reforms under this Act and shall seek to implement such reforms subject to the following:

(1)

To the extent that the Secretary finds a payment and delivery system reform successful in improving quality and reducing costs, the Secretary shall implement such reform on as large a geographic scale as practical and economical.

(2)

The Secretary may delay the implementation of such a reform in geographic areas in which such implementation would place the public health insurance option at a competitive disadvantage.

(3)

The Secretary may prioritize implementation of such a reform in high cost geographic areas or otherwise in order to reduce total program costs or to promote high value care.

(e)

Non-uniformity permitted

Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models (such as accountable care organizations and medical homes) under the public health insurance option for different geographic areas.

325.

Provider participation

(a)

In general

The Secretary shall establish conditions of participation for health care providers under the public health insurance option.

(b)

Licensure or certification

(1)

In general

Except as provided in paragraph (2), the Secretary shall not allow a health care provider to participate in the public health insurance option unless such provider is appropriately licensed, certified, or otherwise permitted to practice under State law.

(2)

Special rule for IHS facilities and providers

The requirements under paragraph (1) shall not apply to—

(A)

a facility that is operated by the Indian Health Service;

(B)

a facility operated by an Indian Tribe or tribal organization under the Indian Self-Determination Act (Public Law 93–638);

(C)

a health care professional employed by the Indian Health Service; or

(D)

a health care professional—

(i)

who is employed to provide health care services in a facility operated by an Indian Tribe or tribal organization under the Indian Self-Determination Act; and

(ii)

who is licensed or certified in any State.

(c)

Payment terms for providers

(1)

Physicians

The Secretary shall provide for the annual participation of physicians under the public health insurance option, for which payment may be made for services furnished during the year, in one of 2 classes:

(A)

Preferred physicians

Those physicians who agree to accept the payment under section 323 (without regard to cost-sharing) as the payment in full.

(B)

Participating, non-preferred physicians

Those physicians who agree not to impose charges (in relation to the payment described in section 323 for such physicians) that exceed the sum of the in-network cost-sharing plus 15 percent of the total payment for each item and service. The Secretary shall reduce the payment described in section 323 for such physicians.

(2)

Other providers

The Secretary shall provide for the participation (on an annual or other basis specified by the Secretary) of health care providers (other than physicians) under the public health insurance option under which payment shall only be available if the provider agrees to accept the payment under section 323 (without regard to cost-sharing) as the payment in full.

(d)

Exclusion of certain providers

The Secretary shall exclude from participation under the public health insurance option a health care provider that is excluded from participation in a Federal health care program (as defined in section 1128B(f) of the Social Security Act).

326.

Application of fraud and abuse provisions

Provisions of civil law identified by the Secretary by regulation, in consultation with the Inspector General of the Department of Health and Human Services, that impose sanctions with respect to waste, fraud, and abuse under Medicare, such as sections 3729 through 3733 of title 31, United States Code (commonly known as the False Claims Act), shall also apply to the public health insurance option.

327.

Application of HIPAA insurance requirements

The requirements of sections 2701 through 2792 of the Public Health Service Act shall apply to the public health insurance option in the same manner as they apply to health insurance coverage offered by a health insurance issuer in the individual market.

Part C of title XI of the Social Security Act, relating to standards for protections against the wrongful disclosure of individually identifiable health information, health information security, and the electronic exchange of health care information, shall apply to the public health insurance option in the same manner as such part applies to other health plans (as defined in section 1171(5) of such Act).

329.

Enrollment in public health insurance option is voluntary

Nothing in this division shall be construed as requiring anyone to enroll in the public health insurance option. Enrollment in such option is voluntary.

330.

Enrollment in public health insurance option by Members of Congress

Notwithstanding any other provision of this Act, Members of Congress may enroll in the public health insurance option.

331.

Reimbursement of Secretary of Veterans Affairs

The Secretary of Health and Human Services shall seek to enter into a memorandum of understanding with the Secretary of Veterans Affairs regarding the recovery of costs related to non-service-connected care or services provided by the Secretary of Veterans Affairs to an individual covered under the public health insurance option in a manner consistent with recovery of costs related to non-service-connected care from private health insurance plans.

C

Individual Affordability Credits

341.

Availability through Health Insurance Exchange

(a)

In general

Subject to the succeeding provisions of this subtitle, in the case of an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan—

(1)

the individual shall be eligible for, in accordance with this subtitle, affordability credits consisting of—

(A)

an affordability premium credit under section 343 to be applied against the premium for the Exchange-participating health benefits plan in which the individual is enrolled; and

(B)

an affordability cost-sharing credit under section 344 to be applied as a reduction of the cost-sharing otherwise applicable to such plan; and

(2)

the Commissioner shall pay the QHBP offering entity that offers such plan from the Health Insurance Exchange Trust Fund the aggregate amount of affordability credits for all affordable credit eligible individuals enrolled in such plan.

(b)

Application

(1)

In general

An Exchange eligible individual may apply to the Commissioner through the Health Insurance Exchange or through another entity under an arrangement made with the Commissioner, in a form and manner specified by the Commissioner. The Commissioner through the Health Insurance Exchange or through another public entity under an arrangement made with the Commissioner shall make a determination as to eligibility of an individual for affordability credits under this subtitle. The Commissioner shall establish a process whereby, on the basis of information otherwise available, individuals may be deemed to be affordable credit eligible individuals. In carrying this subtitle, the Commissioner shall establish effective methods that ensure that individuals with limited English proficiency are able to apply for affordability credits.

(2)

Use of State Medicaid agencies

If the Commissioner determines that a State Medicaid agency has the capacity to make a determination of eligibility for affordability credits under this subtitle and under the same standards as used by the Commissioner, under the Medicaid memorandum of understanding under section 305(e)(2)—

(A)

the State Medicaid agency is authorized to conduct such determinations for any Exchange-eligible individual who requests such a determination; and

(B)

the Commissioner shall reimburse the State Medicaid agency for the costs of conducting such determinations.

(3)

Medicaid screen and enroll obligation

In the case of an application made under paragraph (1), there shall be a determination of whether the individual is a Medicaid-eligible individual. If the individual is determined to be so eligible, the Commissioner, through the Medicaid memorandum of understanding under section 305(e)(2), shall provide for the enrollment of the individual under the State Medicaid plan in accordance with such Medicaid memorandum of understanding. In the case of such an enrollment, the State shall provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid agency.

(4)

Application and verification of requirement of citizenship or lawful presence in the United States

(A)

Requirement

No individual shall be an affordable credit eligible individual (as defined in section 342(a)(1)) unless the individual is a citizen or national of the United States or is lawfully present in a State in the United States (other than as a nonimmigrant described in a subparagraph (excluding subparagraphs (K), (T), (U), and (V)) of section 101(a)(15) of the Immigration and Nationality Act).

(B)

Declaration of citizenship or lawful immigration status

No individual shall be an affordable credit eligible individual unless there has been a declaration made, in a form and manner specified by the Health Choices Commissioner similar to the manner required under section 1137(d)(1) of the Social Security Act and under penalty of perjury, that the individual—

(i)

is a citizen or national of the United States; or

(ii)

is not such a citizen or national but is lawfully present in a State in the United States (other than as a nonimmigrant described in a subparagraph (excluding subparagraphs (K), (T), (U), and (V)) of section 101(a)(15) of the Immigration and Nationality Act).

Such declaration shall be verified in accordance with subparagraph (C) or (D), as the case may be.(C)

Verification process for citizens

(i)

In general

In the case of an individual making the declaration described in subparagraph (B)(i), subject to clause (ii), section 1902(ee) of the Social Security Act shall apply to such declaration in the same manner as such section applies to a declaration described in paragraph (1) of such section.

(ii)

Special rules

In applying section 1902(ee) of such Act under clause (i)—

(I)

any reference in such section to a State is deemed a reference to the Commissioner (or other public entity making the eligibility determination);

(II)

any reference to medical assistance or enrollment under a State plan is deemed a reference to provision of affordability credits under this subtitle;

(III)

a reference to a newly enrolled individual under paragraph (2)(A) of such section is deemed a reference to an individual newly in receipt of an affordability credit under this subtitle;

(IV)

approval by the Secretary shall not be required in applying paragraph (2)(B)(ii) of such section;

(V)

paragraph (3) of such section shall not apply; and

(VI)

before the end of Y2, the Health Choices Commissioner, in consultation with the Commissioner of Social Security, may extend the periods specified in paragraph (1)(B)(ii) of such section.

(D)

Verification process for noncitizens

(i)

In general

In the case of an individual making the declaration described in subparagraph (B)(ii), subject to clause (ii), the verification procedures of paragraphs (2) through (5) of section 1137(d) of the Social Security Act shall apply to such declaration in the same manner as such procedures apply to a declaration described in paragraph (1) of such section.

(ii)

Special rules

In applying such paragraphs of section 1137(d) of such Act under clause (i)—

(I)

any reference in such paragraphs to a State is deemed a reference to the Health Choices Commissioner; and

(II)

any reference to benefits under a program is deemed a reference to affordability credits under this subtitle.

(iii)

Application to State-based exchanges

In the case of the application of the verification process under this subparagraph to a State-based Health Insurance Exchange approved under section 308, section 1137(e) of such Act shall apply to the Health Choices Commissioner in relation to the State.

(E)

Annual reports

The Health Choices Commissioner shall report to Congress annually on the number of applicants for affordability credits under this subtitle, their citizenship or immigration status, and the disposition of their applications. Such report shall be made publicly available and shall include information on—

(i)

the number of applicants whose declaration of citizenship or immigration status, name, or social security account number was not consistent with records maintained by the Commissioner of Social Security or the Department of Homeland Security and, of such applicants, the number who contested the inconsistency and sought to document their citizenship or immigration status, name, or social security account number or to correct the information maintained in such records and, of those, the results of such contestations; and

(ii)

the administrative costs of conducting the status verification under this paragraph.

(F)

GAO report

Not later than the end of Y2, the Comptroller General of the United States shall submit to the Committee on Ways and Means, the Committee on Energy and Commerce, the Committee on Education and Labor, and the Committee on the Judiciary of the House of Representatives and the Committee on Finance, the Committee on Health, Education, Labor, and Pensions, and the Committee on the Judiciary of the Senate a report examining the effectiveness of the citizenship and immigration verification systems applied under this paragraph. Such report shall include an analysis of the following:

(i)

The causes of erroneous determinations under such systems.

(ii)

The effectiveness of the processes used in remedying such erroneous determinations.

(iii)

The impact of such systems on individuals, health care providers, and Federal and State agencies, including the effect of erroneous determinations under such systems.

(iv)

The effectiveness of such systems in preventing ineligible individuals from receiving for affordability credits.

(v)

The characteristics of applicants described in subparagraph (E)(i).

(G)

Prohibition of database

Nothing in this paragraph or the amendments made by paragraph (6) shall be construed as authorizing the Health Choices Commissioner or the Commissioner of Social Security to establish a database of information on citizenship or immigration status.

(H)

Initial funding

(i)

In general

Out of any funds in the Treasury not otherwise appropriated, there is appropriated to the Commissioner of Social Security $30,000,000, to be available without fiscal year limit to carry out this paragraph and section 205(v) of the Social Security Act.

(ii)

Funding limitation

In no case shall funds from the Social Security Administration’s Limitation on Administrative Expenses be used to carry out activities related to this paragraph or section 205(v) of the Social Security Act.

(5)

Agreement with Social Security Commissioner

(A)

In general

The Health Choices Commissioner shall enter into and maintain an agreement described in section 205(v)(2) of the Social Security Act with the Commissioner of Social Security.

(B)

Funding

The agreement entered into under subparagraph (A) shall, for each fiscal year (beginning with fiscal year 2013)—

(i)

provide funds to the Commissioner of Social Security for the full costs of the responsibilities of the Commissioner of Social Security under paragraph (4), including—

(I)

acquiring, installing, and maintaining technological equipment and systems necessary for the fulfillment of the responsibilities of the Commissioner of Social Security under paragraph (4), but only that portion of such costs that are attributable to such responsibilities; and

(II)

responding to individuals who contest with the Commissioner of Social Security a reported inconsistency with records maintained by the Commissioner of Social Security or the Department of Homeland Security relating to citizenship or immigration status, name, or social security account number under paragraph (4);

(ii)

based on an estimating methodology agreed to by the Commissioner of Social Security and the Health Choices Commissioner, provide such funds, within 10 calendar days of the beginning of the fiscal year for the first quarter and in advance for all subsequent quarters in that fiscal year; and

(iii)

provide for an annual accounting and reconciliation of the actual costs incurred and the funds provided under the agreement.

(C)

Review of accounting

The annual accounting and reconciliation conducted pursuant to subparagraph (B)(iii) shall be reviewed by the Inspectors General of the Social Security Administration and the Health Choices Administration, including an analysis of consistency with the requirements of paragraph (4).

(D)

Contingency

In any case in which agreement with respect to the provisions required under subparagraph (B) for any fiscal year has not been reached as of the first day of such fiscal year, the latest agreement with respect to such provisions shall be deemed in effect on an interim basis for such fiscal year until such time as an agreement relating to such provisions is subsequently reached. In any case in which an interim agreement applies for any fiscal year under this subparagraph, the Commissioner of Social Security shall, not later than the first day of such fiscal year, notify the appropriate Committees of the Congress of the failure to reach the agreement with respect to such provisions for such fiscal year. Until such time as the agreement with respect to such provisions has been reached for such fiscal year, the Commissioner of Social Security shall, not later than the end of each 90-day period after October 1 of such fiscal year, notify such Committees of the status of negotiations between such Commissioner and the Health Choices Commissioner in order to reach such an agreement.

(E)

Application to public entities administering affordability credits

If the Health Choices Commissioner provides for the conduct of verifications under paragraph (4) through a public entity, the Health Choices Commissioner shall require the public entity to enter into an agreement with the Commissioner of Social Security which provides the same terms as the agreement described in this paragraph (and section 205(v) of the Social Security Act) between the Health Choices Commissioner and the Commissioner of Social Security, except that the Health Choices Commissioner shall be responsible for providing funds for the Commissioner of Social Security in accordance with subparagraphs (B) through (D).

(6)

Amendments to Social Security Act

(A)

Coordination of information between Social Security Administration and Health Choices Administration

(i)

In general

Section 205 of the Social Security Act (42 U.S.C. 405) is amended by adding at the end the following new subsection:

(v)

Coordination of information with Health Choices Administration

(1)

The Health Choices Commissioner may collect and use the names and social security account numbers of individuals as required to provide for verification of citizenship under subsection (b)(4)(C) of section 341 of the Affordable Health Care for America Act in connection with determinations of eligibility for affordability credits under such section.

(2)(A)

The Commissioner of Social Security shall enter into and maintain an agreement with the Health Choices Commissioner for the purpose of establishing, in compliance with the requirements of section 1902(ee) as applied pursuant to section 341(b)(4)(C) of the Affordable Health Care for America Act, a program for verifying information required to be collected by the Health Choices Commissioner under such section 341(b)(4)(C).

(B)

The agreement entered into pursuant to subparagraph (A) shall include such safeguards as are necessary to ensure the maintenance of confidentiality of any information disclosed for purposes of verifying information described in subparagraph (A) and to provide procedures for permitting the Health Choices Commissioner to use the information for purposes of maintaining the records of the Health Choices Administration.

(C)

The agreement entered into pursuant to subparagraph (A) shall provide that information provided by the Commissioner of Social Security to the Health Choices Commissioner pursuant to the agreement shall be provided at such time, at such place, and in such manner as the Commissioner of Social Security determines appropriate.

(D)

Information provided by the Commissioner of Social Security to the Health Choices Commissioner pursuant to an agreement entered into pursuant to subparagraph (A) shall be considered as strictly confidential and shall be used only for the purposes described in this paragraph and for carrying out such agreement. Any officer or employee or former officer or employee of the Health Choices Commissioner, or any officer or employee or former officer or employee of a contractor of the Health Choices Commissioner, who, without the written authority of the Commissioner of Social Security, publishes or communicates any information in such individual’s possession by reason of such employment or position as such an officer shall be guilty of a felony and, upon conviction thereof, shall be fined or imprisoned, or both, as described in section 208.

(3)

The agreement entered into under paragraph (2) shall provide for funding to the Commissioner of Social Security consistent with section 341(b)(5) of Affordable Health Care for America Act.

(4)

This subsection shall apply in the case of a public entity that conducts verifications under section 341(b)(4) of the Affordable Health Care for America Act and the obligations of this subsection shall apply to such an entity in the same manner as such obligations apply to the Health Choices Commissioner when such Commissioner is conducting such verifications.

.

(ii)

Conforming amendment

Section 205(c)(2)(C) of such Act (42 U.S.C. 405(c)(2)(C)) is amended by adding at the end the following new clause:

(x)

For purposes of the administration of the verification procedures described in section 341(b)(4) of the Affordable Health Care for America Act, the Health Choices Commissioner may collect and use social security account numbers as provided for in section 205(v)(1).

.

(B)

Improving the integrity of data and effectiveness of SAVE

Section 1137(d) of the Social Security Act (42 U.S.C. 1320b–7(d)) is amended by adding at the end the following new paragraphs:

(6)(A)

With respect to the use by any agency of the system described in subsection (b) by programs specified in subsection (b) or any other use of such system, the U.S. Citizenship and Immigration Services and any other agency charged with the management of the system shall establish appropriate safeguards necessary to protect and improve the integrity and accuracy of data relating to individuals by—

(i)

establishing a process though which such individuals are provided access to, and the ability to amend, correct, and update, their own personally identifiable information contained within the system;

(ii)

providing a written response, without undue delay, to any individual who has made such a request to amend, correct, or update such individual’s own personally identifiable information contained within the system; and

(iii)

developing a written notice for user agencies to provide to individuals who are denied a benefit due to a determination of ineligibility based on a final verification determination under the system.

(B)

The notice described in subparagraph (A)(ii) shall include—

(i)

information about the reason for such notice;

(ii)

a description of the right of the recipient of the notice under subparagraph (A)(i) to contest such notice;

(iii)

a description of the right of the recipient under subparagraph (A)(i) to access and attempt to amend, correct, and update the recipient’s own personally identifiable information contained within records of the system described in paragraph (3); and

(iv)

instructions on how to contest such notice and attempt to correct records of such system relating to the recipient, including contact information for relevant agencies.

.

(C)

Streamlining administration of verification process for United States citizens

Section 1902(ee)(2) of the Social Security Act (42 U.S.C. 1396a(ee)(2)) is amended by adding at the end the following:

(D)

In carrying out the verification procedures under this subsection with respect to a State, if the Commissioner of Social Security determines that the records maintained by such Commissioner are not consistent with an individual’s allegation of United States citizenship, pursuant to procedures which shall be established by the State in coordination with the Commissioner of Social Security, the Secretary of Homeland Security, and the Secretary of Health and Human Services—

(i)

the Commissioner of Social Security shall inform the State of the inconsistency;

(ii)

upon being so informed of the inconsistency, the State shall submit the information on the individual to the Secretary of Homeland Security for a determination of whether the records of the Department of Homeland Security indicate that the individual is a citizen;

(iii)

upon making such determination, the Department of Homeland Security shall inform the State of such determination; and

(iv)

information provided by the Commissioner of Social Security shall be considered as strictly confidential and shall only be used by the State and the Secretary of Homeland Security for the purposes of such verification procedures.

(E)

Verification of status eligibility pursuant to the procedures established under this subsection shall be deemed a verification of status eligibility for purposes of this title, title XXI, and affordability credits under section 341(b)(4) of the Affordable Health Care for America Act, regardless of the program in which the individual is applying for benefits.

.

(c)

Use of affordability credits

(1)

In general

In Y1 and Y2 an affordable credit eligible individual may use an affordability credit only with respect to a basic plan.

(2)

Flexibility in plan enrollment authorized

Beginning with Y3, the Commissioner shall establish a process to allow an affordability premium credit under section 343, but not the affordability cost-sharing credit under section 344, to be used for enrollees in enhanced or premium plans. In the case of an affordable credit eligible individual who enrolls in an enhanced or premium plan, the individual shall be responsible for any difference between the premium for such plan and the affordability credit amount otherwise applicable if the individual had enrolled in a basic plan.

(3)

Prohibition of use of public funds for abortion coverage

An affordability credit may not be used for payment for services described in section 222(d)(4)(A).

(d)

Access to data

In carrying out this subtitle, the Commissioner shall request from the Secretary of the Treasury consistent with section 6103 of the Internal Revenue Code of 1986 such information as may be required to carry out this subtitle.

(e)

No cash rebates

In no case shall an affordable credit eligible individual receive any cash payment as a result of the application of this subtitle.

342.

Affordable credit eligible individual

(a)

Definition

(1)

In general

For purposes of this division, the term affordable credit eligible individual means, subject to subsection (b) and section 346, an individual who is lawfully present in a State in the United States (other than as a nonimmigrant described in a subparagraph (excluding subparagraphs (K), (T), (U), and (V)) of section 101(a)(15) of the Immigration and Nationality Act)—

(A)

who is enrolled under an Exchange-participating health benefits plan and is not enrolled under such plan as an employee (or dependent of an employee) through an employer qualified health benefits plan that meets the requirements of section 412;

(B)

with modified adjusted gross income below 400 percent of the Federal poverty level for a family of the size involved;

(C)

who is not a Medicaid eligible individual, other than an individual during a transition period under section 302(d)(3)(B)(ii); and

(D)

subject to paragraph (3), who is not enrolled in acceptable coverage (other than an Exchange-participating health benefits plan).

(2)

Treatment of family

Except as the Commissioner may otherwise provide, members of the same family who are affordable credit eligible individuals shall be treated as a single affordable credit individual eligible for the applicable credit for such a family under this subtitle.

(3)

Special rule for Indians

Subparagraph (D) of paragraph (1) shall not apply to an individual who has coverage that is treated as acceptable coverage for purposes of section 59B(d)(2) of the Internal Revenue Code of 1986 but is not treated as acceptable coverage for purposes of this division.

(b)

Limitations on employee and dependent disqualification

(1)

In general

Subject to paragraph (2), the term affordable credit eligible individual does not include a full-time employee of an employer if the employer offers the employee coverage (for the employee and dependents) as a full-time employee under a group health plan if the coverage and employer contribution under the plan meet the requirements of section 412.

(2)

Exceptions

(A)

For certain family circumstances

The Commissioner shall establish such exceptions and special rules in the case described in paragraph (1) as may be appropriate in the case of a divorced or separated individual or such a dependent of an employee who would otherwise be an affordable credit eligible individual.

(B)

For unaffordable employer coverage

Beginning in Y2, in the case of full-time employees for which the cost of the employee premium for coverage under a group health plan would exceed 12 percent of current modified adjusted gross income (determined by the Commissioner on the basis of verifiable documentation), paragraph (1) shall not apply.

(c)

Income defined

(1)

In general

In this title, the term income means modified adjusted gross income (as defined in section 59B of the Internal Revenue Code of 1986).

(2)

Study of income disregards

The Commissioner shall conduct a study that examines the application of income disregards for purposes of this subtitle. Not later than the first day of Y2, the Commissioner shall submit to Congress a report on such study and shall include such recommendations as the Commissioner determines appropriate.

(d)

Clarification of treatment of affordability credits

Affordability credits under this subtitle shall not be treated, for purposes of title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, to be a benefit provided under section 403 of such title.

343.

Affordability premium credit

(a)

In general

The affordability premium credit under this section for an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan is in an amount equal to the amount (if any) by which the reference premium amount specified in subsection (c), exceeds the affordable premium amount specified in subsection (b) for the individual, except that in no case shall the affordable premium credit exceed the premium for the plan.

(b)

Affordable premium amount

(1)

In general

The affordable premium amount specified in this subsection for an individual for the annual premium in a plan year shall be equal to the product of—

(A)

the premium percentage limit specified in paragraph (2) for the individual based upon the individual’s modified adjusted gross income for the plan year; and

(B)

the individual’s modified adjusted gross income for such plan year.

(2)

Premium percentage limits based on table

The Commissioner shall establish premium percentage limits so that for individuals whose modified adjusted gross income is within an income tier specified in the table in subsection (d) such percentage limits shall increase, on a sliding scale in a linear manner, from the initial premium percentage to the final premium percentage specified in such table for such income tier.

(c)

Reference premium amount

The reference premium amount specified in this subsection for a plan year for an individual in a premium rating area is equal to the average premium for the 3 basic plans in the area for the plan year with the lowest premium levels. In computing such amount the Commissioner may exclude plans with extremely limited enrollments.

(d)

Table of premium percentage limits, actuarial value percentages, and out-of-pocket limits for Y1 based on income tier

(1)

In general

For purposes of this subtitle, subject to paragraph (3) and section 346, the table specified in this subsection is as follows:

In the case of modified adjusted gross income (expressed as a percent of FPL) within the following income tier:

The initial premium percentage is—

The final premium percentage is—

The actuarial value percentage is—

The out-of-pocket limit for Y1 is—

133% through 150%

1.5%

3.0%

97%

$500

150% through 200%

3.0%

5.5%

93%

$1,000

200% through 250%

5.5%

8.0%

85%

$2,000

250% through 300%

8.0%

10.0%

78%

$4,000

300% through 350%

10.0%

11.0%

72%

$4,500

350% through 400%

11.0%

12.0%

70%

$5,000

(2)

Special rules

For purposes of applying the table under paragraph (1):

(A)

For lowest level of income

In the case of an individual with income that does not exceed 133 percent of FPL, the individual shall be considered to have income that is 133 percent of FPL.

If two actuarial value percentages may be determined with respect to an individual, the actuarial value percentage shall be the higher of such percentages.

(3)

Indexing

For years after Y1, the Commissioner shall adjust the initial and final premium percentages to maintain the ratio of governmental to enrollee shares of premiums over time, for each income tier identified in the table in paragraph (1).

344.

Affordability cost-sharing credit

(a)

In general

The affordability cost-sharing credit under this section for an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan is in the form of the cost-sharing reduction described in subsection (b) provided under this section for the income tier in which the individual is classified based on the individual’s modified adjusted gross income.

(b)

Cost-sharing reductions

The Commissioner shall specify a reduction in cost-sharing amounts and the annual limitation on cost-sharing specified in section 222(c)(2)(B) under a basic plan for each income tier specified in the table under section 343(d), with respect to a year, in a manner so that, as estimated by the Commissioner—

(1)

the actuarial value of the coverage with such reduced cost-sharing amounts (and the reduced annual cost-sharing limit) is equal to the actuarial value percentage (specified in the table under section 343(d) for the income tier involved) of the full actuarial value if there were no cost-sharing imposed under the plan; and

(2)

the annual limitation on cost-sharing specified in section 222(c)(2)(B) is reduced to a level that does not exceed the maximum out-of-pocket limit specified in subsection (c).

(c)

Maximum out-of-pocket limit

(1)

In general

Subject to paragraph (2), the maximum out-of-pocket limit specified in this subsection for an individual within an income tier—

(A)

for individual coverage—

(i)

for Y1 is the out-of-pocket limit for Y1 specified in subsection (c) in the table under section 343(d) for the income tier involved; or

(ii)

for a subsequent year is such out-of-pocket limit for the previous year under this subparagraph increased (rounded to the nearest $10) for each subsequent year by the percentage increase in the enrollment-weighted average of premium increases for basic plans applicable to such year; or

(B)

for family coverage is twice the maximum out-of-pocket limit under subparagraph (A) for the year involved.

(2)

Adjustment

The Commissioner shall adjust the maximum out-of-pocket limits under paragraph (1) to ensure that such limits meet the actuarial value percentage specified in the table under section 343(d) for the income tier involved.

(d)

Determination and payment of cost-sharing affordability credit

In the case of an affordable credit eligible individual in a tier enrolled in an Exchange-participating health benefits plan offered by a QHBP offering entity, the Commissioner shall provide for payment to the offering entity of an amount equivalent to the increased actuarial value of the benefits under the plan provided under section 303(c)(2)(B) resulting from the reduction in cost-sharing described in subsections (b) and (c).

345.

Income determinations

(a)

In general

In applying this subtitle for an affordability credit for an individual for a plan year, the individual’s income shall be the income (as defined in section 342(c)) for the individual for the most recent taxable year (as determined in accordance with rules of the Commissioner). The Federal poverty level applied shall be such level in effect as of the date of the application.

(b)

Program integrity; Income verification procedures

(1)

Program integrity

The Commissioner shall take such steps as may be appropriate to ensure the accuracy of determinations and redeterminations under this subtitle.

(2)

Income verification

(A)

In general

Upon an initial application of an individual for an affordability credit under this subtitle (or in applying section 342(b)) or upon an application for a change in the affordability credit based upon a significant change in modified adjusted gross income described in subsection (c)(1)—

(i)

the Commissioner shall request from the Secretary of the Treasury the disclosure to the Commissioner of such information as may be permitted to verify the information contained in such application; and

(ii)

the Commissioner shall use the information so disclosed to verify such information.

(B)

Alternative procedures

The Commissioner shall establish procedures for the verification of income for purposes of this subtitle if no income tax return is available for the most recent completed tax year.

(c)

Special rules

(1)

Changes in income as a percent of FPL

In the case that an individual’s income (expressed as a percentage of the Federal poverty level for a family of the size involved) for a plan year is expected (in a manner specified by the Commissioner) to be significantly different from the income (as so expressed) used under subsection (a), the Commissioner shall establish rules requiring an individual to report, consistent with the mechanism established under paragraph (2), significant changes in such income (including a significant change in family composition) to the Commissioner and requiring the substitution of such income for the income otherwise applicable.

(2)

Reporting of significant changes in income

The Commissioner shall establish rules under which an individual determined to be an affordable credit eligible individual would be required to inform the Commissioner when there is a significant change in the modified adjusted gross income of the individual (expressed as a percentage of the FPL for a family of the size involved) and of the information regarding such change. Such mechanism shall provide for guidelines that specify the circumstances that qualify as a significant change, the verifiable information required to document such a change, and the process for submission of such information. If the Commissioner receives new information from an individual regarding the modified adjusted gross income of the individual, the Commissioner shall provide for a redetermination of the individual’s eligibility to be an affordable credit eligible individual.

(3)

Transition for CHIP

In the case of a child described in section 302(d)(2), the Commissioner shall establish rules under which the modified adjusted gross income of the child is deemed to be no greater than the family income of the child as most recently determined before Y1 by the State under title XXI of the Social Security Act.

(4)

Study of geographic variation in application of FPL

(A)

In general

The Secretary of Health and Human Services shall conduct a study to examine the feasibility and implication of adjusting the application of the Federal poverty level under this subtitle for different geographic areas so as to reflect the variations in cost-of-living among different areas within the United States. If the Secretary determines that an adjustment is feasible, the study should include a methodology to make such an adjustment. Not later than the first day of Y1, the Secretary shall submit to Congress a report on such study and shall include such recommendations as the Secretary determines appropriate.

(B)

Inclusion of territories

(i)

In general

The Secretary shall ensure that the study under subparagraph (A) covers the territories of the United States and that special attention is paid to the disparity that exists among poverty levels and the cost of living in such territories and to the impact of such disparity on efforts to expand health coverage and ensure health care.

(ii)

Territories defined

In this subparagraph, the term territories of the United States includes the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, the Northern Mariana Islands, and any other territory or possession of the United States.

(d)

Penalties for misrepresentation

In the case of an individual who intentionally misrepresents modified adjusted gross income or the individual fails (without regard to intent) to disclose to the Commissioner a significant change in modified adjusted gross income under subsection (c) in a manner that results in the individual becoming an affordable credit eligible individual when the individual is not or in the amount of the affordability credit exceeding the correct amount—

(1)

the individual is liable for repayment of the amount of the improper affordability credit; and

(2)

in the case of such an intentional misrepresentation or other egregious circumstances specified by the Commissioner, the Commissioner may impose an additional penalty.

346.

Special rules for application to territories

(a)

One-time election for treatment and application of funding

(1)

In general

A territory may elect, in a form and manner specified by the Commissioner in consultation with the Secretary of Health and Human Services and the Secretary of the Treasury and not later than October 1, 2012, either—

(A)

to be treated as a State for purposes of applying this title and title II; or

(B)

not to be so treated but instead, to have the dollar limitation otherwise applicable to the territory under subsections (f) and (g) of section 1108 of the Social Security Act (42 U.S.C. 1308) for a fiscal year increased by a dollar amount equivalent to the cap amount determined under subsection (c)(2) for the territory as applied by the Secretary for the fiscal year involved.

(2)

Conditions for acceptance

The Commissioner has the nonreviewable authority to accept or reject an election described in paragraph (1)(A). Any such acceptance is—

(A)

contingent upon entering into an agreement described in subsection (b) between the Commissioner and the territory and subsection (c); and

(B)

subject to the approval of the Secretary of Health and Human Services and the Secretary of the Treasury and subject to such other terms and conditions as the Commissioner, in consultation with such Secretaries, may specify.

(3)

Default rule

A territory failing to make such an election (or having an election under paragraph (1)(A) not accepted under paragraph (2)) shall be treated as having made the election described in paragraph (1)(B).

(b)

Agreement for substitution of percentages for affordability credits

(1)

Negotiation

In the case of a territory making an election under subsection (a)(1)(A) (in this section referred to as an electing territory) , the Commissioner, in consultation with the Secretaries of Health and Human Services and the Treasury, shall enter into negotiations with the government of such territory so that, before Y1, there is an agreement reached between the parties on the percentages that shall be applied under paragraph (2) for that territory. The Commissioner shall not enter into such an agreement unless—

(A)

payments made under this subtitle with respect to residents of the territory are consistent with the cap established under subsection (c) for such territory and with subsection (d); and

(B)

the requirements of paragraphs (3) and (4) are met.

(2)

Application of substitute percentages and dollar amounts

In the case of an electing territory, there shall be substituted in section 342(a)(1)(B) and in the table in section 341(d)(1) for 400 percent, 133 percent, and other percentages and dollar amounts specified in such table, such respective percentages and dollar amounts as are established under the agreement under paragraph (1) consistent with the following:

(A)

No income gap between medicaid and affordability credits

The substituted percentages shall be specified in a manner so as to prevent any gap in coverage for individuals between income level at which medical assistance is available through Medicaid and the income level at which affordability credits are available.

(B)

Adjustment for out-of-pocket responsibility for premiums and cost-sharing in relation to income

The substituted percentages of FPL for income tiers under such table shall be specified in a manner so that—

(i)

affordable credit eligible individuals residing in the territory bear the same out-of-pocket responsibility for premiums and cost-sharing in relation to average income for residents in that territory, as

(ii)

the out-of-pocket responsibility for premiums and cost-sharing for affordable credit eligible individuals residing in the 50 States or the District of Columbia in relation to average income for such residents.

(3)

Special rules with respect to application of tax and penalty provisions

The electing territory shall enact one or more laws under which provisions similar to the following provisions apply with respect to such territory:

(A)

Section 59B of the Internal Revenue Code of 1986, except that any resident of the territory who is not an affordable credit eligible individual but who would be an affordable credit eligible individual if such resident were a resident of one of the 50 States (and any qualifying child residing with such individual) may be treated as covered by acceptable coverage.

(B)

Section 4980H of the Internal Revenue Code of 1986 and section 502(c)(11) of the Employee Retirement Income Security Act of 1974.

The electing territory shall enact and implement such laws and regulations as may be required to apply the requirements of title II with respect to health insurance coverage offered in the territory.

(c)

Cap on additional expenditures

(1)

In general

In entering into an agreement with an electing territory under subsection (b), the Commissioner shall ensure that the aggregate expenditures under this subtitle with respect to residents of such territory during the period beginning with Y1 and ending with 2019 will not exceed the cap amount specified in paragraph (2) for such territory. The Commissioner shall adjust from time to time the percentages applicable under such agreement as needed in order to carry out the previous sentence.

(2)

Cap amount

(A)

In general

The cap amount specified in this paragraph—

(i)

for Puerto Rico is $3,700,000,000 increased by the amount (if any) elected under subparagraph (C); or

(ii)

for another territory is the portion of $300,000,000 negotiated for such territory under subparagraph (B).

(B)

Negotiation for certain territories

The Commissioner in consultation with the Secretary of Health and Human Services shall negotiate with the governments of the territories (other than Puerto Rico) to allocate the amount specified in subparagraph (A)(ii) among such territories.

(C)

Optional supplementation for Puerto Rico

(i)

In general

Puerto Rico may elect, in a form and manner specified by the Secretary of Health and Human Services in consultation with the Commissioner to increase the dollar amount specified in subparagraph (A)(i) by up to $1,000,000,000.

(ii)

Offset in Medicaid cap

If Puerto Rico makes the election described in clause (i), the Secretary shall decrease the dollar limitation otherwise applicable to Puerto Rico under subsections (f) and (g) of section 1108 of the Social Security Act (42 U.S.C. 1308) for a fiscal year by the additional aggregate payments the Secretary estimates will be payable under this section for the fiscal year because of such election.

(d)

Limitation on funding

In no case shall this section (including the agreement under subsection (b)) permit—

(1)

the obligation of funds for expenditures under this subtitle for periods beginning on or after January 1, 2020; or

(2)

any increase in the dollar limitation described in subsection (a)(1)(B) for any portion of any fiscal year occurring on or after such date.

347.

No Federal payment for undocumented aliens

Nothing in this subtitle shall allow Federal payments for affordability credits on behalf of individuals who are not lawfully present in the United States.

IV

Shared responsibility

A

Individual responsibility

401.

Individual responsibility

For an individual’s responsibility to obtain acceptable coverage, see section 59B of the Internal Revenue Code of 1986 (as added by section 501 of this Act).

B

Employer Responsibility

1

Health coverage participation requirements

411.

Health coverage participation requirements

An employer meets the requirements of this section if such employer does all of the following:

(1)

Offer of coverage

The employer offers each employee individual and family coverage under a qualified health benefits plan (or under a current employment-based health plan (within the meaning of section 202(b))) in accordance with section 412.

(2)

Contribution towards coverage

If an employee accepts such offer of coverage, the employer makes timely contributions towards such coverage in accordance with section 412.

(3)

Contribution in lieu of coverage

Beginning with Y2, if an employee declines such offer but otherwise obtains coverage in an Exchange-participating health benefits plan (other than by reason of being covered by family coverage as a spouse or dependent of the primary insured), the employer shall make a timely contribution to the Health Insurance Exchange with respect to each such employee in accordance with section 413.

An employer meets the requirements of this section with respect to an employee if the following requirements are met:

(1)

Offering of coverage

The employer offers the coverage described in section 411(1). In the case of an Exchange-eligible employer, the employer may offer such coverage either through an Exchange-participating health benefits plan or other than through such a plan.

(2)

Employer required contribution

The employer timely pays to the issuer of such coverage an amount not less than the employer required contribution specified in subsection (b) for such coverage.

(3)

Provision of information

The employer provides the Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury, as applicable, with such information as the Commissioner may require to ascertain compliance with the requirements of this section, including the following:

(A)

The name, date, and employer identification number of the employer.

(B)

A certification as to whether the employer offers to its full-time employees (and their dependents) the opportunity to enroll in a qualified health benefits plan or a current employment-based health plan (within the meaning of section 202(b)).

(C)

If the employer certifies that the employer did offer to its full-time employees (and their dependents) the opportunity to so enroll—

(i)

the months during the calendar year for which such coverage was available; and

(ii)

the monthly premium for the lowest cost option in each of the enrollment categories under each such plan offered to employees.

(D)

The name, address, and TIN of each full-time employee during the calendar year and the months (if any) during which such employee (and any dependents) were covered under any such plans.

(4)

Autoenrollment of employees

The employer provides for autoenrollment of the employee in accordance with subsection (c).

This subsection shall supersede any law of a State which would prevent automatic payroll deduction of employee contributions to an employment-based health plan. (b)

Reduction of employee premiums through minimum employer contribution

(1)

Full-time employees

The minimum employer contribution described in this subsection for coverage of a full-time employee (and, if any, the employee’s spouse and qualifying children (as defined in section 152(c) of the Internal Revenue Code of 1986)) under a qualified health benefits plan (or current employment-based health plan) is equal to—

(A)

in case of individual coverage, not less than 72.5 percent of the applicable premium (as defined in section 4980B(f)(4) of such Code, subject to paragraph (2)) of the lowest cost plan offered by the employer that is a qualified health benefits plan (or is such current employment-based health plan); and

(B)

in the case of family coverage which includes coverage of such spouse and children, not less 65 percent of such applicable premium of such lowest cost plan.

(2)

Applicable premium for Exchange coverage

In this subtitle, the amount of the applicable premium of the lowest cost plan with respect to coverage of an employee under an Exchange-participating health benefits plan is the reference premium amount under section 343(c) for individual coverage (or, if elected, family coverage) for the premium rating area in which the individual or family resides.

(3)

Minimum employer contribution for employees other than full-time employees

In the case of coverage for an employee who is not a full-time employee, the amount of the minimum employer contribution under this subsection shall be a proportion (as determined in accordance with rules of the Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury, as applicable) of the minimum employer contribution under this subsection with respect to a full-time employee that reflects the proportion of—

(A)

the average weekly hours of employment of the employee by the employer, to

(B)

the minimum weekly hours specified by the Commissioner for an employee to be a full-time employee.

(4)

Salary reductions not treated as employer contributions

For purposes of this section, any contribution on behalf of an employee with respect to which there is a corresponding reduction in the compensation of the employee shall not be treated as an amount paid by the employer.

(c)

Automatic enrollment for employer sponsored health benefits

(1)

In general

The requirement of this subsection with respect to an employer and an employee is that the employer automatically enroll such employee into the employment-based health benefits plan for individual coverage under the plan option with the lowest applicable employee premium.

(2)

Opt-out

In no case may an employer automatically enroll an employee in a plan under paragraph (1) if such employee makes an affirmative election to opt out of such plan or to elect coverage under an employment-based health benefits plan offered by such employer. An employer shall provide an employee with a 30-day period to make such an affirmative election before the employer may automatically enroll the employee in such a plan.

(3)

Notice requirements

(A)

In general

Each employer described in paragraph (1) who automatically enrolls an employee into a plan as described in such paragraph shall provide the employees, within a reasonable period before the beginning of each plan year (or, in the case of new employees, within a reasonable period before the end of the enrollment period for such a new employee), written notice of the employees’ rights and obligations relating to the automatic enrollment requirement under such paragraph. Such notice must be comprehensive and understood by the average employee to whom the automatic enrollment requirement applies.

(B)

Inclusion of specific information

The written notice under subparagraph (A) must explain an employee’s right to opt out of being automatically enrolled in a plan and in the case that more than one level of benefits or employee premium level is offered by the employer involved, the notice must explain which level of benefits and employee premium level the employee will be automatically enrolled in the absence of an affirmative election by the employee.

413.

Employer contributions in lieu of coverage

(a)

In general

A contribution is made in accordance with this section with respect to an employee if such contribution is equal to an amount equal to 8 percent of the average wages paid by the employer during the period of enrollment (determined by taking into account all employees of the employer and in such manner as the Commissioner provides, including rules providing for the appropriate aggregation of related employers) but not to exceed the minimum employer contribution described in section 412(b)(1)(A). Any such contribution—

(1)

shall be paid to the Health Choices Commissioner for deposit into the Health Insurance Exchange Trust Fund; and

(2)

shall not be applied against the premium of the employee under the Exchange-participating health benefits plan in which the employee is enrolled.

(b)

Special rules for small employers

(1)

In general

In the case of any employer who is a small employer for any calendar year, subsection (a) shall be applied by substituting the applicable percentage determined in accordance with the following table for 8 percent:

If the annual payroll of such employer for the preceding calendar year:

The applicable percentage is:

Does not exceed $500,000

0 percent

Exceeds $500,000, but does not exceed $585,000

2 percent

Exceeds $585,000, but does not exceed $670,000

4 percent

Exceeds $670,000, but does not exceed $750,000

6 percent

(2)

Small employer

For purposes of this subsection, the term small employer means any employer for any calendar year if the annual payroll of such employer for the preceding calendar year does not exceed $750,000.

(3)

Annual payroll

For purposes of this paragraph, the term annual payroll means, with respect to any employer for any calendar year, the aggregate wages paid by the employer during such calendar year.

(4)

Aggregation rules

Related employers and predecessors shall be treated as a single employer for purposes of this subsection.

414.

Authority related to improper steering

The Health Choices Commissioner (in coordination with the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury) shall have authority to set standards for determining whether employers or insurers are undertaking any actions to affect the risk pool within the Health Insurance Exchange by inducing individuals to decline coverage under a qualified health benefits plan (or current employment-based health plan (within the meaning of section 202(b)) offered by the employer and instead to enroll in an Exchange-participating health benefits plan. An employer violating such standards shall be treated as not meeting the requirements of this section.

415.

Impact study on employer responsibility requirements

(a)

In general

The Secretary of Labor shall conduct a study to examine the effect of the exemptions under section 512(a) and coverage thresholds under this division (in this section referred to collectively as "employer responsibility requirements)on employment-based health plan sponsorship, generally and within specific industries, and the effect of such requirements and thresholds on employers, employment-based health plans, and employees in each industry.

(b)

Annual report

The Secretary of Labor annually shall submit to Congress a report on findings on how employer responsibility requirements have impacted and are likely to impact employers, plans, and employees during the previous year and projected trends.

(c)

Legislative recommendations

No later than January 1, 2012 and on an annual basis thereafter, the Secretary of Labor shall submit legislative recommendations to Congress to modify the employer responsibility requirements if the Secretary determines that the requirements are detrimentally affecting or will detrimentally affect employer plan sponsorship or otherwise creating inequities among employers, health plans, and employees. The Secretary may also submit such recommendations as the Secretary determines necessary to improve and strengthen employment-based health plan sponsorship, employer responsibility, and related proposals that would enhance the delivery of health care benefits between employers and employees.

416.

Study on employer hardship exemption

(a)

In general

The Secretary of Labor together with the Secretary of Treasury, the Secretary of Health and Human Services, and the Commissioner, shall conduct a study to examine the impact of the employer responsibility requirements described in section 415(a) and make a recommendation to Congress about whether an employer hardship exemption would be appropriate.

(b)

Items included in study

Within such study the Secretaries and Commissioner shall examine cases where such employer responsibility requirements may pose a particular hardship, and specifically look at employers by industry, profit margin, length of time in business, and size. In this examination, the economic conditions shall be considered, including the rate of increase in business costs, the availability of short-term credit lines, and abilities to restructure debt. In addition, the study shall examine the impact an employer hardship waiver could have on employees.

(c)

Report

Not later than January 1, 2012, the Secretaries and Commissioner shall report to Congress on their findings and make a recommendation regarding the need or lack of need for a partial or complete employer hardship waiver. The Secretaries and Commissioner may also submit recommendations about the criteria Congress should include when developing eligibility requirements for the employer hardship waiver and what safeguards are necessary to protect the employees of that employer.

2

Satisfaction of Health Coverage Participation Requirements

421.

Satisfaction of health coverage participation requirements under the Employee Retirement Income Security Act of 1974

(a)

In general

Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding at the end the following new part:

8

National Health Coverage Participation Requirements

801.

Election of employer to be subject to national health coverage participation requirements

(a)

In general

An employer may make an election with the Secretary to be subject to the health coverage participation requirements.

(b)

Time and manner

An election under subsection (a) may be made at such time and in such form and manner as the Secretary may prescribe.

802.

Treatment of coverage resulting from election

(a)

In general

If an employer makes an election to the Secretary under section 801—

(1)

such election shall be treated as the establishment and maintenance of a group health plan (as defined in section 733(a)) for purposes of this title, subject to section 251 of the ; and

(2)

the health coverage participation requirements shall be deemed to be included as terms and conditions of such plan.

(b)

Periodic investigations To discover noncompliance

The Secretary shall regularly audit a representative sampling of employers and group health plans and conduct investigations and other activities under section 504 with respect to such sampling of plans so as to discover noncompliance with the health coverage participation requirements in connection with such plans. The Secretary shall communicate findings of noncompliance made by the Secretary under this subsection to the Secretary of the Treasury and the Health Choices Commissioner. The Secretary shall take such timely enforcement action as appropriate to achieve compliance.

(c)

Recordkeeping

To facilitate the audits described in subsection (b), the Secretary shall promulgate recordkeeping requirements for employers to account for both employees of the employer and individuals whom the employer has not treated as employees of the employer but with whom the employer, in the course of its trade or business, has engaged for the performance of labor or services. The scope and content of such recordkeeping requirements shall be determined by the Secretary and shall be designed to ensure that employees who are not properly treated as such may be identified and properly treated.

803.

Health coverage participation requirements

For purposes of this part, the term health coverage participation requirements means the requirements of part 1 of subtitle B of title IV of division A of (as in effect on the date of the enactment of such Act).

804.

Rules for applying requirements

(a)

Affiliated groups

In the case of any employer which is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986, the election under section 801 shall be made by such employer as the Secretary may provide. Any such election, once made, shall apply to all members of such group.

(b)

Separate elections

Under regulations prescribed by the Secretary, separate elections may be made under section 801 with respect to—

(1)

separate lines of business, and

(2)

full-time employees and employees who are not full-time employees.

805.

Termination of election in cases of substantial noncompliance

The Secretary may terminate the election of any employer under section 801 if the Secretary (in coordination with the Health Choices Commissioner) determines that such employer is in substantial noncompliance with the health coverage participation requirements and shall refer any such determination to the Secretary of the Treasury as appropriate.

806.

Regulations

The Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of this part, in accordance with section 424(a) of the . The Secretary may promulgate any interim final rules as the Secretary determines are appropriate to carry out this part.

.

(b)

Enforcement of health coverage participation requirements

Section 502 of such Act (29 U.S.C. 1132) is amended—

(1)

in subsection (a)(6), by striking paragraph and all that follows through subsection (c) and inserting paragraph (2), (4), (5), (6), (7), (8), (9), (10), or (11) of subsection (c); and

(2)

in subsection (c), by redesignating the second paragraph (10) as paragraph (12) and by inserting after the first paragraph (10) the following new paragraph:

(11)

Health coverage participation requirements

(A)

Civil penalties

In the case of any employer who fails (during any period with respect to which an election under section 801(a) is in effect) to satisfy the health coverage participation requirements with respect to any employee, the Secretary may assess a civil penalty against the employer of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.

(B)

Health coverage participation requirements

For purposes of this paragraph, the term health coverage participation requirements has the meaning provided in section 803.

(C)

Limitations on amount of penalty

(i)

Penalty not to apply where failure not discovered exercising reasonable diligence

No penalty shall be assessed under subparagraph (A) with respect to any failure during any period for which it is established to the satisfaction of the Secretary that the employer did not know, or exercising reasonable diligence would not have known, that such failure existed.

(ii)

Penalty not to apply to failures corrected within 30 days

No penalty shall be assessed under subparagraph (A) with respect to any failure if—

(I)

such failure was due to reasonable cause and not to willful neglect, and

(II)

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

(iii)

Overall limitation for unintentional failures

In the case of failures which are due to reasonable cause and not to willful neglect, the penalty assessed under subparagraph (A) for failures during any 1-year period shall not exceed the amount equal to the lesser of—

(I)

10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding 1-year period for group health plans, or

(II)

$500,000.

(D)

Advance notification of failure prior to assessment

Before a reasonable time prior to the assessment of any penalty under this paragraph with respect to any failure by an employer, the Secretary shall inform the employer in writing of such failure and shall provide the employer information regarding efforts and procedures which may be undertaken by the employer to correct such failure.

(E)

Coordination with excise tax

Under regulations prescribed in accordance with section 424 of the , the Secretary and the Secretary of the Treasury shall coordinate the assessment of penalties under this section in connection with failures to satisfy health coverage participation requirements with the imposition of excise taxes on such failures under section 4980H(b) of the Internal Revenue Code of 1986 so as to avoid duplication of penalties with respect to such failures.

(F)

Deposit of penalty collected

Any amount of penalty collected under this paragraph shall be deposited as miscellaneous receipts in the Treasury of the United States.

.

(c)

Clerical amendments

The table of contents in section 1 of such Act is amended by inserting after the item relating to section 734 the following new items:

Part 8—National Health Coverage Participation Requirements

Sec. 801. Election of employer to be subject to national health coverage participation requirements.

Sec. 802. Treatment of coverage resulting from election.

Sec. 803. Health coverage participation requirements.

Sec. 804. Rules for applying requirements.

Sec. 805. Termination of election in cases of substantial noncompliance.

Sec. 806. Regulations.

.

(d)

Effective date

The amendments made by this section shall apply to periods beginning after December 31, 2012.

422.

Satisfaction of health coverage participation requirements under the Internal Revenue Code of 1986

For employment tax on employers who fail to elect, or substantially comply with, the health coverage participation requirements described in part 1, see section 3111(c) of the Internal Revenue Code of 1986 (as added by section 512 of this Act).

(b)

Other failures

For excise tax on other failures of electing employers to comply with such requirements, see section 4980H of the Internal Revenue Code of 1986 (as added by section 511 of this Act).

423.

Satisfaction of health coverage participation requirements under the Public Health Service Act

(a)

In general

Part C of title XXVII of the Public Health Service Act is amended by adding at the end the following new section:

2793.

National health coverage participation requirements

(a)

Election of employer To be subject to national health coverage participation requirements

(1)

In general

An employer may make an election with the Secretary to be subject to the health coverage participation requirements.

(2)

Time and manner

An election under paragraph (1) may be made at such time and in such form and manner as the Secretary may prescribe.

(b)

Treatment of coverage resulting from election

(1)

In general

If an employer makes an election to the Secretary under subsection (a)—

(A)

such election shall be treated as the establishment and maintenance of a group health plan for purposes of this title, subject to section 251 of the Affordable Health Care for America Act; and

(B)

the health coverage participation requirements shall be deemed to be included as terms and conditions of such plan.

The Secretary shall regularly audit a representative sampling of employers and conduct investigations and other activities with respect to such sampling of employers so as to discover noncompliance with the health coverage participation requirements in connection with such employers (during any period with respect to which an election under subsection (a) is in effect). The Secretary shall communicate findings of noncompliance made by the Secretary under this subsection to the Secretary of the Treasury and the Health Choices Commissioner. The Secretary shall take such timely enforcement action as appropriate to achieve compliance.

(3)

Recordkeeping

To facilitate the audits described in subsection (b), the Secretary shall promulgate recordkeeping requirements for employers to account for both employees of the employer and individuals whom the employer has not treated as employees of the employer but with whom the employer, in the course of its trade or business, has engaged for the performance of labor or services. The scope and content of such recordkeeping requirements shall be determined by the Secretary and shall be designed to ensure that employees who are not properly treated as such may be identified and properly treated.

(c)

Health coverage participation requirements

For purposes of this section, the term health coverage participation requirements means the requirements of part 1 of subtitle B of title IV of division A of the (as in effect on the date of the enactment of this section).

(d)

Separate elections

Under regulations prescribed by the Secretary, separate elections may be made under subsection (a) with respect to full-time employees and employees who are not full-time employees.

(e)

Termination of election in cases of substantial noncompliance

The Secretary may terminate the election of any employer under subsection (a) if the Secretary (in coordination with the Health Choices Commissioner) determines that such employer is in substantial noncompliance with the health coverage participation requirements and shall refer any such determination to the Secretary of the Treasury as appropriate.

(f)

Enforcement of health coverage participation requirements

(1)

Civil penalties

In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee, the Secretary may assess a civil penalty against the employer of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.

(2)

Limitations on amount of penalty

(A)

Penalty not to apply where failure not discovered exercising reasonable diligence

No penalty shall be assessed under paragraph (1) with respect to any failure during any period for which it is established to the satisfaction of the Secretary that the employer did not know, or exercising reasonable diligence would not have known, that such failure existed.

(B)

Penalty not to apply to failures corrected within 30 days

No penalty shall be assessed under paragraph (1) with respect to any failure if—

(i)

such failure was due to reasonable cause and not to willful neglect, and

(ii)

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

(C)

Overall limitation for unintentional failures

In the case of failures which are due to reasonable cause and not to willful neglect, the penalty assessed under paragraph (1) for failures during any 1-year period shall not exceed the amount equal to the lesser of—

(i)

10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for group health plans, or

(ii)

$500,000.

(3)

Advance notification of failure prior to assessment

Before a reasonable time prior to the assessment of any penalty under paragraph (1) with respect to any failure by an employer, the Secretary shall inform the employer in writing of such failure and shall provide the employer information regarding efforts and procedures which may be undertaken by the employer to correct such failure.

(4)

Actions to enforce assessments

The Secretary may bring a civil action in any District Court of the United States to collect any civil penalty under this subsection.

(5)

Coordination with excise tax

Under regulations prescribed in accordance with section 424 of the , the Secretary and the Secretary of the Treasury shall coordinate the assessment of penalties under paragraph (1) in connection with failures to satisfy health coverage participation requirements with the imposition of excise taxes on such failures under section 4980H(b) of the Internal Revenue Code of 1986 so as to avoid duplication of penalties with respect to such failures.

(6)

Deposit of penalty collected

Any amount of penalty collected under this subsection shall be deposited as miscellaneous receipts in the Treasury of the United States.

(g)

Regulations

The Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of this section, in accordance with section 424(a) of the . The Secretary may promulgate any interim final rules as the Secretary determines are appropriate to carry out this section.

.

(b)

Effective date

The amendments made by subsection (a) shall apply to periods beginning after December 31, 2012.

The officers consisting of the Secretary of Labor, the Secretary of the Treasury, the Secretary of Health and Human Services, and the Health Choices Commissioner shall ensure, through the execution of an interagency memorandum of understanding among such officers, that—

(1)

regulations, rulings, and interpretations issued by such officers relating to the same matter over which two or more of such officers have responsibility under subpart B of part 8 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, section 4980H of the Internal Revenue Code of 1986, and section 2793 of the Public Health Service Act are administered so as to have the same effect at all times; and

(2)

coordination of policies relating to enforcing the same requirements through such officers in order to have a coordinated enforcement strategy that avoids duplication of enforcement efforts and assigns priorities in enforcement.

(b)

Multiemployer plans

In the case of a group health plan that is a multiemployer plan (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974), the regulations prescribed in accordance with subsection (a) by the officers referred to in subsection (a) shall provide for the application of the health coverage participation requirements to the plan sponsor and contributing employers of such plan. For purposes of this division, contributions made pursuant to a collective bargaining agreement or other agreement to such a group health plan shall be treated as amounts paid by the employer.

V

Amendments to Internal Revenue Code of 1986

A

Provisions relating to health care reform

1

Shared responsibility

A

Individual responsibility

501.

Tax on individuals without acceptable health care coverage

(a)

In general

Subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new part:

In the case of any individual who does not meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed a tax equal to 2.5 percent of the excess of—

(1)

the taxpayer’s modified adjusted gross income for the taxable year, over

(2)

the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.

(b)

Limitations

(1)

Tax limited to average premium

(A)

In general

The tax imposed under subsection (a) with respect to any taxpayer for any taxable year shall not exceed the applicable national average premium for such taxable year.

(B)

Applicable national average premium

(i)

In general

For purposes of subparagraph (A), the applicable national average premium means, with respect to any taxable year, the average premium (as determined by the Secretary, in coordination with the Health Choices Commissioner) for self-only coverage under a basic plan which is offered in a Health Insurance Exchange for the calendar year in which such taxable year begins.

(ii)

Failure to provide coverage for more than one individual

In the case of any taxpayer who fails to meet the requirements of subsection (d) with respect to more than one individual during the taxable year, clause (i) shall be applied by substituting family coverage for self-only coverage.

(2)

Proration for part year failures

The tax imposed under subsection (a) with respect to any taxpayer for any taxable year shall not exceed the amount which bears the same ratio to the amount of tax so imposed (determined without regard to this paragraph and after application of paragraph (1)) as—

(A)

the aggregate periods during such taxable year for which such individual failed to meet the requirements of subsection (d), bears to

(B)

the entire taxable year.

(c)

Exceptions

(1)

Dependents

Subsection (a) shall not apply to any individual for any taxable year if a deduction is allowable under section 151 with respect to such individual to another taxpayer for any taxable year beginning in the same calendar year as such taxable year.

(2)

Nonresident aliens

Subsection (a) shall not apply to any individual who is a nonresident alien.

(3)

Individuals residing outside United States

Any qualified individual (as defined in section 911(d)) (and any qualifying child residing with such individual) shall be treated for purposes of this section as covered by acceptable coverage during the period described in subparagraph (A) or (B) of section 911(d)(1), whichever is applicable.

(4)

Individuals residing in possessions of the United States

Any individual who is a bona fide resident of any possession of the United States (as determined under section 937(a)) for any taxable year (and any qualifying child residing with such individual) shall be treated for purposes of this section as covered by acceptable coverage during such taxable year.

(5)

Religious conscience exemption

(A)

In general

Subsection (a) shall not apply to any individual (and any qualifying child residing with such individual) for any period if such individual has in effect an exemption which certifies that such individual is a member of a recognized religious sect or division thereof described in section 1402(g)(1) and an adherent of established tenets or teachings of such sect or division as described in such section.

(B)

Exemption

An application for the exemption described in subparagraph (A) shall be filed with the Secretary at such time and in such form and manner as the Secretary may prescribe. The Secretary may treat an application for exemption under section 1402(g)(1) as an application for exemption under this section, or may otherwise coordinate applications under such sections, as the Secretary determines appropriate. Any such exemption granted by the Secretary shall be effective for such period as the Secretary determines appropriate.

(d)

Acceptable coverage requirement

(1)

In general

The requirements of this subsection are met with respect to any individual for any period if such individual (and each qualifying child of such individual) is covered by acceptable coverage at all times during such period.

(2)

Acceptable coverage

For purposes of this section, the term acceptable coverage means any of the following:

(A)

Qualified health benefits plan coverage

Coverage under a qualified health benefits plan (as defined in section 100(c) of the ).

Coverage under a grandfathered health insurance coverage (as defined in subsection (a) of section 202 of the ) or under a current employment-based health plan (within the meaning of subsection (b) of such section).

(C)

Medicare

Coverage under part A of title XVIII of the Social Security Act.

(D)

Medicaid

Coverage for medical assistance under title XIX of the Social Security Act.

(E)

Members of the Armed Forces and dependents (including TRICARE)

Coverage under chapter 55 of title 10, United States Code, including similar coverage furnished under section 1781 of title 38 of such Code.

(F)

VA

Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code.

(G)

Members of Indian tribes

Health care services made available through the Indian Health Service, a tribal organization (as defined in section 4 of the Indian Health Care Improvement Act), or an urban Indian organization (as defined in such section) to members of an Indian tribe (as defined in such section).

(H)

Other coverage

Such other health benefits coverage as the Secretary, in coordination with the Health Choices Commissioner, recognizes for purposes of this subsection.

(e)

Other definitions and special rules

(1)

Qualifying child

For purposes of this section, the term qualifying child has the meaning given such term by section 152(c). With respect to any period during which health coverage for a child must be provided by an individual pursuant to a child support order, such child shall be treated as a qualifying child of such individual (and not as a qualifying child of any other individual).

(2)

Basic plan

For purposes of this section, the term basic plan has the meaning given such term under section 100(c) of the .

(3)

Health Insurance Exchange

For purposes of this section, the term Health Insurance Exchange has the meaning given such term under section 100(c) of the , including any State-based health insurance exchange approved for operation under section 308 of such Act.

(4)

Family coverage

For purposes of this section, the term family coverage means any coverage other than self-only coverage.

(5)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income increased by—

(A)

any amount excluded from gross income under section 911, and

(B)

any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.

(6)

Not treated as tax imposed by this chapter for certain purposes

The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

(f)

Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance (developed in coordination with the Health Choices Commissioner) which provide—

(1)

exemption from the tax imposed under subsection (a) in cases of de minimis lapses of acceptable coverage, and

(2)

a waiver of the application of subsection (a) in cases of hardship, including a process for applying for such a waiver.

.

(b)

Information reporting

(1)

In general

Subpart B of part III of subchapter A of chapter 61 of such Code is amended by inserting after section 6050W the following new section:

6050X.

Returns relating to health insurance coverage

(a)

Requirement of reporting

Every person who provides acceptable coverage (as defined in section 59B(d)) to any individual during any calendar year shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to such individual.

(b)

Form and manner of returns

A return is described in this subsection if such return—

(1)

is in such form as the Secretary may prescribe, and

(2)

contains—

(A)

the name, address, and TIN of the primary insured and the name of each other individual obtaining coverage under the policy,

(B)

the period for which each such individual was provided with the coverage referred to in subsection (a), and

(C)

such other information as the Secretary may require.

(c)

Statements to be furnished to individuals with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each primary insured whose name is required to be set forth in such return a written statement showing—

(1)

the name and address of the person required to make such return and the phone number of the information contact for such person, and

(2)

the information required to be shown on the return with respect to such individual.

The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.(d)

Coverage provided by governmental units

In the case of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer or employee who enters into the agreement to provide such coverage (or the person appropriately designated for purposes of this section) shall make the returns and statements required by this section.

.

(2)

Penalty for failure to file

(A)

Return

Subparagraph (B) of section 6724(d)(1) of such Code is amended by striking or at the end of clause (xxii), by striking and at the end of clause (xxiii) and inserting or, and by adding at the end the following new clause:

Paragraph (2) of section 6724(d) of such Code is amended by striking or at the end of subparagraph (EE), by striking the period at the end of subparagraph (FF) and inserting , or, and by inserting after subparagraph (FF) the following new subparagraph:

Subsection (a) of section 6012 of such Code is amended by inserting after paragraph (9) the following new paragraph:

(10)

Every individual to whom section 59B(a) applies and who fails to meet the requirements of section 59B(d) with respect to such individual or any qualifying child (as defined in section 152(c)) of such individual.

.

(d)

Clerical amendments

(1)

The table of parts for subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Part VIII. Health care related taxes.

.

(2)

The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new item:

Sec. 6050X. Returns relating to health insurance coverage.

.

(e)

Section 15 not to apply

The amendment made by subsection (a) shall not be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

(f)

Effective date

(1)

In general

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

(2)

Returns

The amendments made by subsection (b) shall apply to calendar years beginning after December 31, 2012.

B

Employer Responsibility

511.

Election to satisfy health coverage participation requirements

(a)

In general

Chapter 43 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

4980H.

Election with respect to health coverage participation requirements

(a)

Election of employer responsibility to provide health coverage

(1)

In general

Subsection (b) shall apply to any employer with respect to whom an election under paragraph (2) is in effect.

(2)

Time and manner

An employer may make an election under this paragraph at such time and in such form and manner as the Secretary may prescribe.

(3)

Affiliated groups

In the case of any employer which is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414, the election under paragraph (2) shall be made by such person as the Secretary may provide. Any such election, once made, shall apply to all members of such group.

(4)

Separate elections

Under regulations prescribed by the Secretary, separate elections may be made under paragraph (2) with respect to—

(A)

separate lines of business, and

(B)

full-time employees and employees who are not full-time employees.

(5)

Termination of election in cases of substantial noncompliance

The Secretary may terminate the election of any employer under paragraph (2) if the Secretary (in coordination with the Health Choices Commissioner) determines that such employer is in substantial noncompliance with the health coverage participation requirements.

In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee to whom such election applies, there is hereby imposed on each such failure with respect to each such employee a tax of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.

(2)

Limitations on amount of tax

(A)

Tax not to apply where failure not discovered exercising reasonable diligence

No tax shall be imposed by paragraph (1) on any failure during any period for which it is established to the satisfaction of the Secretary that the employer neither knew, nor exercising reasonable diligence would have known, that such failure existed.

(B)

Tax not to apply to failures corrected within 30 days

No tax shall be imposed by paragraph (1) on any failure if—

(i)

such failure was due to reasonable cause and not to willful neglect, and

(ii)

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

(C)

Overall limitation for unintentional failures

In the case of failures which are due to reasonable cause and not to willful neglect, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of—

(i)

10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for employment-based health plans, or

(ii)

$500,000.

(D)

Coordination with other enforcement provisions

The tax imposed under paragraph (1) with respect to any failure shall be reduced (but not below zero) by the amount of any civil penalty collected under section 502(c)(11) of the Employee Retirement Income Security Act of 1974 or section 2793(g) of the Public Health Service Act with respect to such failure.

(c)

Health coverage participation requirements

For purposes of this section, the term health coverage participation requirements means the requirements of part I of subtitle B of title IV of the (as in effect on the date of the enactment of this section).

.

(b)

Clerical amendment

The table of sections for chapter 43 of such Code is amended by adding at the end the following new item:

The amendments made by this section shall apply to periods beginning after December 31, 2012.

512.

Health care contributions of nonelecting employers

(a)

In general

Section 3111 of the Internal Revenue Code of 1986 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

(c)

Employers electing not to provide health benefits

(1)

In general

In addition to other taxes, there is hereby imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of the wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b)).

(2)

Special rules for small employers

(A)

In general

In the case of any employer who is small employer for any calendar year, paragraph (1) shall be applied by substituting the applicable percentage determined in accordance with the following table for 8 percent:

If the annual payroll of such employer for the preceding calendar year:

The applicable percentage is:

Does not exceed $500,000

0 percent

Exceeds $500,000, but does not exceed $585,000

2 percent

Exceeds $585,000, but does not exceed $670,000

4 percent

Exceeds $670,000, but does not exceed $750,000

6 percent

(B)

Small employer

For purposes of this paragraph, the term small employer means any employer for any calendar year if the annual payroll of such employer for the preceding calendar year does not exceed $750,000.

(C)

Annual payroll

For purposes of this paragraph, the term annual payroll means, with respect to any employer for any calendar year, the aggregate wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b)) during such calendar year.

(3)

Nonelecting employer

For purposes of paragraph (1), the term nonelecting employer means any employer for any period with respect to which such employer does not have an election under section 4980H(a) in effect.

(4)

Special rule for separate elections

In the case of an employer who makes a separate election described in section 4980H(a)(4) for any period, paragraph (1) shall be applied for such period by taking into account only the wages paid to employees who are not subject to such election.

(5)

Aggregation; predecessors

For purposes of this subsection—

(A)

all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer, and

(B)

any reference to any person shall be treated as including a reference to any predecessor of such person.

.

(b)

Definitions

Section 3121 of such Code is amended by adding at the end the following new subsection:

(aa)

Special rules for tax on employers electing not to provide health benefits

For purposes of section 3111(c)—

(1)

Paragraphs (1), (5), and (19) of subsection (b) shall not apply.

(2)

Paragraph (7) of subsection (b) shall apply by treating all services as not covered by the retirement systems referred to in subparagraphs (C) and (F) thereof.

(3)

Subsection (e) shall not apply and the term State shall include the District of Columbia.

.

(c)

Conforming amendment

Subsection (d) of section 3111 of such Code, as redesignated by this section, is amended by striking this section and inserting subsections (a) and (b).

(d)

Application to railroads

(1)

In general

Section 3221 of such Code is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

(c)

Employers electing not to provide health benefits

(1)

In general

In addition to other taxes, there is hereby imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of the compensation paid during any calendar year by such employer for services rendered to such employer.

(2)

Exception for small employers

Rules similar to the rules of section 3111(c)(2) shall apply for purposes of this subsection.

(3)

Nonelecting employer

For purposes of paragraph (1), the term nonelecting employer means any employer for any period with respect to which such employer does not have an election under section 4980H(a) in effect.

(4)

Special rule for separate elections

In the case of an employer who makes a separate election described in section 4980H(a)(4) for any period, subsection (a) shall be applied for such period by taking into account only the compensation paid to employees who are not subject to such election.

.

(2)

Definitions

Subsection (e) of section 3231 of such Code is amended by adding at the end the following new paragraph:

(13)

Special rules for tax on employers electing not to provide health benefits

For purposes of section 3221(c)—

(A)

Paragraph (1) shall be applied without regard to the third sentence thereof.

(B)

Paragraph (2) shall not apply.

.

(3)

Conforming amendment

Subsection (d) of section 3221 of such Code, as redesignated by this section, is amended by striking subsections (a) and (b), see section 3231(e)(2) and inserting this section, see paragraphs (2) and (13)(B) of section 3231(e).

(e)

Effective date

The amendments made by this section shall apply to periods beginning after December 31, 2012.

2

Credit for small business employee health coverage expenses

521.

Credit for small business employee health coverage expenses

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by adding at the end the following new section:

45R.

Small business employee health coverage credit

(a)

In general

For purposes of section 38, in the case of a qualified small employer, the small business employee health coverage credit determined under this section for the taxable year is an amount equal to the applicable percentage of the qualified employee health coverage expenses of such employer for such taxable year.

(b)

Applicable percentage

(1)

In general

For purposes of this section, the applicable percentage is 50 percent.

(2)

Phaseout based on average compensation of employees

In the case of an employer whose average annual employee compensation for the taxable year exceeds $20,000, the percentage specified in paragraph (1) shall be reduced by a number of percentage points which bears the same ratio to 50 as such excess bears to $20,000.

(c)

Limitations

(1)

Phaseout based on employer size

In the case of an employer who employs more than 10 qualified employees during the taxable year, the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this paragraph and after the application of the other provisions of this section) as—

(A)

the excess of—

(i)

the number of qualified employees employed by the employer during the taxable year, over

(ii)

10, bears to

(B)

15.

(2)

Credit not allowed with respect to certain highly compensated employees

No credit shall be determined under subsection (a) with respect to qualified employee health coverage expenses paid or incurred with respect to any employee for any taxable year if the aggregate compensation paid by the employer to such employee during such taxable year exceeds $80,000.

(3)

Credit allowed for only 2 taxable years

No credit shall be determined under subsection (a) with respect to any employer for any taxable year unless the employer elects to have this section apply for such taxable year. An employer may elect the application of this section with respect to not more than 2 taxable years.

(d)

Qualified employee health coverage expenses

For purposes of this section—

(1)

In general

The term qualified employee health coverage expenses means, with respect to any employer for any taxable year, the aggregate amount paid or incurred by such employer during such taxable year for coverage of any qualified employee of the employer (including any family coverage which covers such employee) under qualified health coverage.

For purposes of this section, the term qualified small employer means any employer for any taxable year if—

(A)

the number of qualified employees employed by such employer during the taxable year does not exceed 25, and

(B)

the average annual employee compensation of such employer for such taxable year does not exceed the sum of the dollar amounts in effect under subsection (b)(2).

(2)

Qualified employee

The term qualified employee means any employee of an employer for any taxable year of the employer if such employee received at least $5,000 of compensation from such employer for services performed in the trade or business of such employer during such taxable year.

(3)

Average annual employee compensation

The term average annual employee compensation means, with respect to any employer for any taxable year, the average amount of compensation paid by such employer to qualified employees of such employer during such taxable year.

(4)

Compensation

The term compensation has the meaning given such term in section 408(p)(6)(A).

(5)

Family coverage

The term family coverage means any coverage other than self-only coverage.

(f)

Special rules

For purposes of this section—

(1)

Special rule for partnerships and self-employed

In the case of a partnership (or a trade or business carried on by an individual) which has one or more qualified employees (determined without regard to this paragraph) with respect to whom the election under section 4980H(a) applies, each partner (or, in the case of a trade or business carried on by an individual, such individual) shall be treated as an employee.

(2)

Aggregation rule

All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.

(3)

Predecessors

Any reference in this section to an employer shall include a reference to any predecessor of such employer.

(4)

Denial of double benefit

Any deduction otherwise allowable with respect to amounts paid or incurred for health insurance coverage to which subsection (a) applies shall be reduced by the amount of the credit determined under this section.

(5)

Inflation adjustment

In the case of any taxable year beginning after 2013, each of the dollar amounts in subsections (b)(2), (c)(2), and (e)(2) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost of living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof.

If any increase determined under this paragraph is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

.

(b)

Credit to be part of general business credit

Subsection (b) of section 38 of such Code (relating to general business credit) is amended by striking plus at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting , plus , and by adding at the end the following new paragraph:

(36)

in the case of a qualified small employer (as defined in section 45R(e)), the small business employee health coverage credit determined under section 45R(a).

.

(c)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45Q the following new item:

Sec. 45R. Small business employee health coverage credit.

.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

3

Limitations on health care related expenditures

531.

Distributions for medicine qualified only if for prescribed drug or insulin

(a)

HSAs

Subparagraph (A) of section 223(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug or is insulin..

(b)

Archer MSAs

Subparagraph (A) of section 220(d)(2) of such Code is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug or is insulin..

Section 106 of such Code is amended by adding at the end the following new subsection:

(f)

Reimbursements for medicine restricted to prescribed drugs and insulin

For purposes of this section and section 105, reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug or is insulin.

.

(d)

Effective dates

The amendment made by this section shall apply to expenses incurred after December 31, 2010.

by redesignating subsections (i) and (j) as subsections (j) and (k), respectively, and

(2)

by inserting after subsection (h) the following new subsection:

(i)

Limitation on health flexible spending arrangements

(1)

In general

For purposes of this section, if a benefit is provided under a cafeteria plan through employer contributions to a health flexible spending arrangement, such benefit shall not be treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of $2,500 made to such arrangement.

(2)

Inflation adjustment

In the case of any taxable year beginning after 2013, the dollar amount in paragraph (1) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost of living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof.

If any increase determined under this paragraph is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

533.

Increase in penalty for nonqualified distributions from health savings accounts

(a)

In general

Subparagraph (A) of section 223(f)(4) of the Internal Revenue Code of 1986 is amended by striking 10 percent and inserting 20 percent.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2010.

534.

Denial of deduction for federal subsidies for prescription drug plans which have been excluded from gross income

(a)

In general

Section 139A of the Internal Revenue Code of 1986 is amended by striking the second sentence.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2010.

4

Other provisions to carry out health insurance reform

541.

Disclosures to carry out health insurance exchange subsidies

(a)

In general

Subsection (l) of section 6103 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

The Secretary, upon written request from the Health Choices Commissioner or the head of a State-based health insurance exchange approved for operation under section 308 of the , shall disclose to officers and employees of the Health Choices Administration or such State-based health insurance exchange, as the case may be, return information of any taxpayer whose income is relevant in determining any affordability credit described in subtitle C of title III of the . Such return information shall be limited to—

(i)

taxpayer identity information with respect to such taxpayer,

(ii)

the filing status of such taxpayer,

(iii)

the modified adjusted gross income of such taxpayer (as defined in section 59B(e)(5)),

(iv)

the number of dependents of the taxpayer,

(v)

such other information as is prescribed by the Secretary by regulation as might indicate whether the taxpayer is eligible for such affordability credits (and the amount thereof), and

(vi)

the taxable year with respect to which the preceding information relates or, if applicable, the fact that such information is not available.

(B)

Restriction on use of disclosed information

Return information disclosed under subparagraph (A) may be used by officers and employees of the Health Choices Administration or such State-based health insurance exchange, as the case may be, only for the purposes of, and to the extent necessary in, establishing and verifying the appropriate amount of any affordability credit described in subtitle C of title III of the and providing for the repayment of any such credit which was in excess of such appropriate amount.

.

(b)

Procedures and recordkeeping related to disclosures

Paragraph (4) of section 6103(p) of such Code is amended—

(1)

by inserting , or any entity described in subsection (l)(21), after or (20) in the matter preceding subparagraph (A),

(2)

by inserting or any entity described in subsection (l)(21), after or (o)(1)(A), in subparagraph (F)(ii), and

(3)

by inserting or any entity described in subsection (l)(21), after or (20), both places it appears in the matter after subparagraph (F).

(c)

Unauthorized disclosure or inspection

Paragraph (2) of section 7213(a) of such Code is amended by striking or (20) and inserting (20), or (21).

Subsection (f) of section 125 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(3)

Certain exchange-participating health benefits plans not qualified

(A)

In general

The term qualified benefit shall not include any exchange-participating health benefits plan (as defined in section 101(c) of the ).

(B)

Exception for exchange-eligible employers

Subparagraph (A) shall not apply with respect to any employee if such employee’s employer is an exchange-eligible employer (as defined in section 302 of the ).

.

(b)

Conforming amendments

Subsection (f) of section 125 of such Code is amended—

(1)

by striking For purposes of this section, the term and inserting

For purposes of this section—

(1)

In general

The term

, and

(2)

by striking Such term shall not include and inserting the following:

(2)

Long-term care insurance not qualified

The term qualified benefit shall not include

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

543.

Exclusion from gross income of payments made under reinsurance program for retirees

(a)

In general

Section 139A of the Internal Revenue Code of 1986 is amended—

(1)

by striking Gross income and inserting the following:

(a)

Federal subsidies for prescription drug plans

Gross income

, and

(2)

by adding at the end the following new subsection:

(b)

Federal reinsurance program for retirees

A rule similar to the rule of subsection (a) shall apply with respect to payments made under section 111 of the Affordable Health Care for America Act.

.

(b)

Conforming amendment

The heading of section 139A of such Code (and the item relating to such section in the table of sections for part III of subchapter B of chapter 1 of such Code) is amended by inserting and retiree health plans after prescription drug plans.

(c)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

544.

CLASS program treated in same manner as long-term care insurance

(a)

In general

Subsection (f) of section 7702B of the Internal Revenue Code of 1986 is amended—

(1)

by striking State long-term care plan in paragraph (1)(A) and inserting government long-term care plan,

(2)

by redesignating paragraph (2) as paragraph (3), and

(3)

by inserting after paragraph (2) the following new paragraph:

(2)

Government long-term care plan

For purposes of this subsection, the term government long-term care plan means—

(A)

the CLASS program established under title XXXII of the Public Health Service Act, and

(B)

any State long-term care plan.

.

(b)

Conforming amendments

(1)

Paragraph (3) of section 7702B(f) of such Code, as redesignated by subsection (a), is amended by striking paragraph (1) and inserting this subsection.

(2)

Subsection (f) of section 7702(B) of such Code is amended by striking State-maintained in the heading thereof and inserting government.

(c)

Effective date

The amendments made by this section shall apply to taxable years ending after December 31, 2010.

545.

Exclusion from gross income for medical care provided for Indians

(a)

In general

Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by inserting after section 139C the following new section:

139D.

Medical care provided for Indians

(a)

In general

Gross income does not include—

(1)

health services or benefits provided or purchased by the Indian Health Service, either directly or indirectly, through a grant to or a contract or compact with an Indian tribe or tribal organization or through programs of third parties funded by the Indian Health Service,

(2)

medical care provided by an Indian tribe or tribal organization to a member of an Indian tribe (including for this purpose, to the member’s spouse or dependents) through any one of the following: provided or purchased medical care services; accident or health insurance (or an arrangement having the effect of accident or health insurance); or amounts paid, directly or indirectly, to reimburse the member for expenses incurred for medical care,

(3)

the value of accident or health plan coverage provided by an Indian tribe or tribal organization for medical care to a member of an Indian tribe (including for this purpose, coverage that extends to such member's spouse or dependents) under an accident or health plan (or through an arrangement having the effect of accident or health insurance), and

(4)

any other medical care provided by an Indian tribe that supplements, replaces, or substitutes for the programs and services provided by the Federal Government to Indian tribes or Indians.

(b)

Definitions

For purposes of this section—

(1)

In general

The terms accident or health insurance and accident or health plan have the same meaning as when used in sections 104 and 106.

(2)

Medical care

The term medical care has the meaning given such term in section 213.

(3)

Dependent

The term dependent has the meaning given such term in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B).

(4)

Indian tribe

The term Indian tribe means any Indian tribe, band, nation, pueblo, or other organized group or community, including any Alaska Native village, or regional or village corporation, as defined in, or established pursuant to, the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.

(5)

Tribal organization

The term tribal organization has the meaning given such term in section 4(l) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(l)).

.

(b)

Clerical amendment

The table of sections for such part III is amended by inserting after the item relating to section 139C the following new item:

Sec. 139D. Medical care provided for Indians..

(c)

Effective date

The amendments made by this section shall apply to health benefits and coverage provided after the date of enactment of this Act.

(d)

No inference

Nothing in the amendments made by this section shall be construed to create an inference with respect to the exclusion from gross income of—

(1)

benefits provided by Indian tribes that are not within the scope of this section, and

(2)

health benefits or coverage provided by Indian tribes prior to the effective date of this section.

B

Other revenue provisions

1

General provisions

551.

Surcharge on high income individuals

(a)

In general

Part VIII of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as added by this title, is amended by adding at the end the following new subpart:

B

Surcharge on high income individuals

Sec. 59C. Surcharge on high income individuals.

59C.

Surcharge on high income individuals

(a)

General rule

In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000.

(b)

Taxpayers not making a joint return

In the case of any taxpayer other than a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), subsection (a) shall be applied by substituting $500,000 for $1,000,000.

(c)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income reduced by any deduction (not taken into account in determining adjusted gross income) allowed for investment interest (as defined in section 163(d)). In the case of an estate or trust, adjusted gross income shall be determined as provided in section 67(e).

(d)

Special rules

(1)

Nonresident alien

In the case of a nonresident alien individual, only amounts taken into account in connection with the tax imposed under section 871(b) shall be taken into account under this section.

(2)

Citizens and residents living abroad

The dollar amount in effect under subsection (a) (after the application of subsection (b)) shall be decreased by the excess of—

(A)

the amounts excluded from the taxpayer’s gross income under section 911, over

(B)

the amounts of any deductions or exclusions disallowed under section 911(d)(6) with respect to the amounts described in subparagraph (A).

(3)

Charitable trusts

Subsection (a) shall not apply to a trust all the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B).

(4)

Not treated as tax imposed by this chapter for certain purposes

The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

.

(b)

Clerical amendment

The table of subparts for part VIII of subchapter A of chapter 1 of such Code, as added by this title, is amended by inserting after the item relating to subpart A the following new item:

Subpart B. Surcharge on high income individuals.

.

(c)

Section 15 not to apply

The amendment made by subsection (a) shall not be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

552.

Excise tax on medical devices

(a)

In general

Chapter 31 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

D

Medical devices

Sec. 4061. Medical devices.

4061.

Medical devices

(a)

In general

There is hereby imposed on the first taxable sale of any medical device a tax equal to 2.5 percent of the price for which so sold.

(b)

First taxable sale

For purposes of this section—

(1)

In general

The term first taxable sale means the first sale, for a purpose other than for resale, after production, manufacture, or importation.

(2)

Exception for sales at retail establishments

Such term shall not include the sale of any medical device if—

(A)

such sale is made at a retail establishment on terms which are available to the general public, and

(B)

such medical device is of a type (and purchased in a quantity) which is purchased by the general public.

(3)

Exception for exports, etc

Rules similar to the rules of sections 4221 (other than paragraphs (3), (4), (5), and (6) of subsection (a) thereof) and 4222 shall apply for purposes of this section. To the extent provided by the Secretary, section 4222 may be extended to, and made applicable with respect to, the exemption provided by paragraph (2).

(4)

Sales to patients not treated as resales

If a medical device is sold for use in connection with providing any health care service to an individual, such sale shall not be treated as being for the purpose of resale (even if such device is sold to such individual).

(c)

Other definitions and special rules

For purposes of this section—

(1)

Medical device

The term medical device means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans.

(2)

Lease treated as sale

Rules similar to the rules of section 4217 shall apply.

(3)

Use treated as sale

(A)

In general

If any person uses a medical device before the first taxable sale of such device, then such person shall be liable for tax under such subsection in the same manner as if such use were the first taxable sale of such device.

(B)

Exceptions

The preceding sentence shall not apply to—

(i)

use of a medical device as material in the manufacture or production of, or as a component part of, another medical device to be manufactured or produced by such person, or

(ii)

use of a medical device after a sale described in subsection (b)(2).

(4)

Determination of price

(A)

In general

Rules similar to the rules of subsections (a), (c), and (d) of section 4216 shall apply for purposes of this section.

(B)

Constructive sale price

If—

(i)

a medical device is sold (otherwise than through an arm’s length transaction) at less than the fair market price, or

(ii)

a person is liable for tax for a use described in paragraph (3),

the tax under this section shall be computed on the price for which such or similar devices are sold in the ordinary course of trade as determined by the Secretary.(5)

Resales pursuant to certain contract arrangements

(A)

In general

In the case of a specified contract sale of a medical device, the seller referred to in subparagraph (B)(i) shall be entitled to recover from the producer, manufacturer, or importer referred to in subparagraph (B)(ii) the amount of the tax paid by such seller under this section with respect to such sale.

(B)

Specified contract sale

For purposes of this paragraph, the term specified contract sale means, with respect to any medical device, the first taxable sale of such device if—

(i)

the seller is not the producer, manufacturer, or importer of such device,

(ii)

the price at which such device is so sold is determined in accordance with a contract between the producer, manufacturer, or importer of such device and the person to whom such device is so sold.

(C)

Special rules related to credits and refunds

In the case of any credit or refund under section 6416 of the tax imposed under this section on a specified contract sale of a medical device—

(i)

such credit or refund shall be allowed or made only if the seller has filed with the Secretary the written consent of the producer, manufacturer, or importer referred to in subparagraph (B)(ii) to the allowance of such credit or the making of such refund, and

(ii)

the amount of tax taken into account under subparagraph (A) shall be reduced by the amount of such credit or refund.

.

(b)

Conforming amendments

(1)

Paragraph (2) of section 6416(b) of such Code is amended—

(A)

by inserting or 4061 after under section 4051, and

(B)

by adding at the end the following: In the case of the tax imposed by section 4061, subparagraphs (B), (C), (D), and (E) shall not apply..

(2)

The table of subchapters for chapter 31 of such Code is amended by adding at the end the following new item:

Subchapter D. Medical devices.

.

(c)

Effective date

The amendments made by this section shall apply to sales (and leases and uses treated as sales) after December 31, 2012.

553.

Expansion of information reporting requirements

(a)

In general

Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:

(h)

Application to corporations

Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term person includes any corporation that is not an organization exempt from tax under section 501(a).

(i)

Regulations

The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.

.

(b)

Payments for property and other gross proceeds

Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—

(1)

by inserting amounts in consideration for property, after wages,,

(2)

by inserting gross proceeds, after emoluments, or other, and

(3)

by inserting gross proceeds, after setting forth the amount of such.

(c)

Effective date

The amendments made by this section shall apply to payments made after December 31, 2011.

554.

Delay in application of worldwide allocation of interest

(a)

In general

Paragraphs (5)(D) and (6) of section 864(f) of the Internal Revenue Code of 1986 are each amended by striking December 31, 2010 and inserting December 31, 2019.

(b)

Transition

Subsection (f) of section 864 of such Code is amended by striking paragraph (7).

2

Prevention of tax avoidance

561.

Limitation on treaty benefits for certain deductible payments

(a)

In general

Section 894 of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended by adding at the end the following new subsection:

(d)

Limitation on treaty benefits for certain deductible payments

(1)

In general

In the case of any deductible related-party payment, any withholding tax imposed under chapter 3 (and any tax imposed under subpart A or B of this part) with respect to such payment may not be reduced under any treaty of the United States unless any such withholding tax would be reduced under a treaty of the United States if such payment were made directly to the foreign parent corporation.

(2)

Deductible related-party payment

For purposes of this subsection, the term deductible related-party payment means any payment made, directly or indirectly, by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities.

(3)

Foreign controlled group of entities

For purposes of this subsection—

(A)

In general

The term foreign controlled group of entities means a controlled group of entities the common parent of which is a foreign corporation.

(B)

Controlled group of entities

The term controlled group of entities means a controlled group of corporations as defined in section 1563(a)(1), except that—

(i)

more than 50 percent shall be substituted for at least 80 percent each place it appears therein, and

(ii)

the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563.

A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).(4)

Foreign parent corporation

For purposes of this subsection, the term foreign parent corporation means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A).

(5)

Regulations

The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for—

(A)

the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation, and

(B)

the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities.

.

(b)

Effective date

The amendment made by this section shall apply to payments made after the date of the enactment of this Act.

562.

Codification of economic substance doctrine; penalties

(a)

In general

Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

(o)

Clarification of economic substance doctrine

(1)

Application of doctrine

In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—

(A)

the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and

(B)

the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

(2)

Special rule where taxpayer relies on profit potential

(A)

In general

The potential for profit of a transaction shall be taken into account in determining whether the requirements of subparagraphs (A) and (B) of paragraph (1) are met with respect to the transaction only if the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected.

(B)

Treatment of fees and foreign taxes

Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (A).

(3)

State and local tax benefits

For purposes of paragraph (1), any State or local income tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect.

(4)

Financial accounting benefits

For purposes of paragraph (1)(B), achieving a financial accounting benefit shall not be taken into account as a purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of Federal income tax.

(5)

Definitions and special rules

For purposes of this subsection—

(A)

Economic substance doctrine

The term economic substance doctrine means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.

(B)

Exception for personal transactions of individuals

In the case of an individual, paragraph (1) shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.

(C)

Other common law doctrines not affected

Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.

(D)

Determination of application of doctrine not affected

The determination of whether the economic substance doctrine is relevant to a transaction (or series of transactions) shall be made in the same manner as if this subsection had never been enacted.

(6)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.

Subsection (b) of section 6662 of such Code is amended by inserting after paragraph (5) the following new paragraph:

(6)

Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.

.

(2)

Increased penalty for nondisclosed transactions

Section 6662 of such Code is amended by adding at the end the following new subsection:

(i)

Increase in penalty in case of nondisclosed noneconomic substance transactions

(1)

In general

In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting 40 percent for 20 percent.

(2)

Nondisclosed noneconomic substance transactions

For purposes of this subsection, the term nondisclosed noneconomic substance transaction means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

(3)

Special rule for amended returns

Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.

.

(3)

Conforming amendment

Subparagraph (B) of section 6662A(e)(2) of such Code is amended—

(A)

by striking section 6662(h) and inserting subsections (h) or (i) of section 6662, and

by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,

(B)

by striking paragraph (2) in paragraph (4)(A), as so redesignated, and inserting paragraph (3), and

(C)

by inserting after paragraph (1) the following new paragraph:

(2)

Exception

Paragraph (1) shall not apply to any portion of an underpayment which is attributable to one or more tax shelters (as defined in section 6662(d)(2)(C)) or transactions described in section 6662(b)(6).

.

(2)

Reasonable cause exception for reportable transaction understatements

Subsection (d) of section 6664 of such Code is amended—

(A)

by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,

(B)

by striking paragraph (2)(C) in paragraph (4), as so redesignated, and inserting paragraph (3)(C), and

(C)

by inserting after paragraph (1) the following new paragraph:

(2)

Exception

Paragraph (1) shall not apply to any portion of a reportable transaction understatement which is attributable to one or more tax shelters (as defined in section 6662(d)(2)(C)) or transactions described in section 6662(b)(6).

.

(d)

Application of penalty for erroneous claim for refund or credit to noneconomic substance transactions

Section 6676 of such Code is amended by redesignating subsection (c) as subsection (d) and inserting after subsection (b) the following new subsection: